Why Starbucks has lost millions of customers – by the man who turned it into the world’s biggest coffee chain
Starbucks customers are fed up with high prices and painfully slow service. The coffee chain admits it has lost tens of millions of visitors this year.
It seems former CEO Howard Schultz — who spent nearly four decades building Starbucks into the world’s largest coffee chain — has had enough, too.
The billionaire, who left last year, said on Sunday that the chain’s new bosses should stop making excuses. He wants them to spend more time in stores – to see what customers want – and also focus on coffee.
Instead, current boss Laxman Narasimhan is pinning his hopes on quirky offerings – unrelated to coffee – such as boba drinks, sugar-free options and the brand’s first energy drink.
One thing everyone agrees on – including Schultz, Narasimhan and fed-up customers – is that Starbucks needs to address the often long wait for coffee.
One thing the current CEO and the old CEO don’t seem to want to talk about is the sky-high prices – with basic coffee like lattes costing more than $6.
Starbucks founder and former CEO Howard Schultz says company leaders should spend more time in stores and focus on coffee drinks as they work to reverse declining sales
Statbucks CEO Laxman Narasimhan said the slow service is putting off customers
Starbucks customers are abandoning orders while waiting in line because it’s taking too long
“Any company that fails seriously needs to see remorse and renewed focus and discipline on the core,” wrote in one LinkedIn message on Sunday.
“Manage the deficiency without the slightest appearance of excuse.”
In his role, Schultz said senior leaders – including board members – should spend more time talking to baristas in the company’s stores.
“I have emphasized that the company’s solution must start at home: US operations are the main reason the company has fallen from grace,” he said.
‘The stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in data, but in the stores.’
At some points in his post, Schultz appeared to question Narasimhan’s turnaround plans.
In a conference call with investors last week, Narasimhan mentioned several new products that he believes will draw customers to stores later this year, including boba drinks, sugar-free options and the brand’s first energy drink.
But Schultz said coffee is what sets Starbucks apart and reinforces the company’s premium positioning.
“The go-to-market strategy needs to be revised and taken to the next level with innovation in coffee,” he said.
Shultz wasn’t actually the founder of Starbucks. But he bought it from the previous owners in 1987, when it had only seventeen locations, and turned it into the largest coffee chain in the world.
In the LinkedIn post published Sunday, Schultz said many people had contacted him after Starbucks reported disastrous earnings for the January through March period last week.
Starbucks — which has about 17,000 stores in North America — saw a drop in sales for the first time since the height of the pandemic as tens of millions of customers stopped going to its cafes.
It wasn’t until November that it reported record revenues.
A long list of excuses for the massive drop in customers was offered by current CEO Laxman Narasimhan.
The fact that Americans continued to tighten their belts, bad weather and boycotts by pro-Palestinian supporters all played a role.
Narasimhan also said the chain’s notoriously slow service – which led to as many as one in seven mobile orders being canceled – was a big factor. Narasimhan said Starbucks would continue to see slow sales in the spring and summer.
He was mocked by commentators for suggesting that the answer lay in strange drinks, such as new tea with lavender.
That wasn’t what Shultz wanted to hear, and investors didn’t like it either: the shares plummeted.
Howard Schultz, left, speaks while still interim CEO of Starbucks after introducing new CEO Laxman Narasimhan during a 2022 investor day in Seattle
Schultz wants Starbucks’ current bosses to put the emphasis back on coffee, not gimmicky drinks
Starbucks lost millions of customers in the first three months of the year
Schultz, who bought Starbucks in 1987, is credited with growing the company into the global behemoth it has become with nearly 39,000 stores worldwide.
Schultz, who resigned from the board last fall, remains Starbucks’ largest individual shareholder, with shares valued at $1.5 billion at the end of last year.
But Schultz said coffee is what sets Starbucks apart and reinforces the company’s premium positioning.
“The go-to-market strategy needs to be revised and taken to the next level with innovation in coffee,” he said.
Narasimhan last month announced plans for pop-up coffee shops in the US and elsewhere.
Starbucks plans to use the stores to experiment with limited-edition coffee drinks, teach younger customers about coffee and learn about customer preferences.
Schultz also said the company needs to update its mobile ordering and payment platform to “return it to the uplifting experience it was designed to be.”
He did not specify what changes he believes should be made.
On Monday, Starbucks said in a statement: “We always value Howard’s perspective. The challenges and opportunities he highlights are the challenges and opportunities we focus on. And like Howard, we are confident in Starbucks’ long-term success.”
On TikTok, mikeylorenz0 complained about having to ‘wait 20 minutes’ for a black coffee, while others ordered a ‘venti iced grande sugar caramel marshmallow ugat’. He called for an express line for people who only want basic drinks, such as black coffee or latte, without modifications.
Schultz has a history of intervening when he sees Starbucks struggling. He retired as CEO in 2000 and became chairman of the company. He returned as CEO in 2008 when the company faced the recession.
Schultz stepped down again in 2017, but returned in 2022 to temporarily lead the company.
In 2023, he appointed Narasimhan, a former PepsiCo executive, as CEO. Schultz became chairman emeritus when he left the board.
Shares of Starbucks were flat on Monday. The company’s share price has fallen by more than 20 percent since the beginning of this year.