Starbucks is scaling back its promotions and discounts, an early move by new CEO Brian Nicol to reposition the coffee chain after a tumultuous year. Since Mr. Nicol took over in August, Starbucks has quietly scaled back on the frenzied discounts it offered for extended periods over the past year, company executives and baristas said.
Starbucks and other restaurant chains have been raising menu prices for years, but this year they are increasingly leaning toward discounts to lure customers back. Executives said the price hikes were necessary to cover rising costs and wages, but restaurants weary of inflation, especially low-income consumers, are cutting back on eating out, and chains are trying to promote their value. , encouraging them to develop transactions.
Starbucks is pivoting away from discounts as Mr. Nicol emphasizes the company’s focus on selling premium, handcrafted coffee. Starbucks has shied away from discounts and promotions for years, but recently ramped up offers through its app as traffic at its cafes slumped and customers complained about high prices and long wait times. .
In September, the company is offering extra loyalty points on Tuesdays and sales on several drink purchases on Saturdays, including buy-one-get-one-50% off, which ran for months earlier this year. sale has been reduced.
Starbucks does not plan to run widespread offers during the holiday season and instead aims to promote seasonal drinks through advertising, the company said in an early October strategy update for store leaders.
Nicol, who took over at Starbucks about a month ago, is trying to reset the company after a turbulent year. Starbucks has experienced downsizing in the U.S. and China, and the company has lowered its sales forecast twice this year. Activist shareholders flocked to Starbucks stock, and the company’s board fired former CEO Laxman Narasimhan in August. He was replaced by Nicol, the former chief executive of Chipotle Mexican Grill, who led the company’s turnaround.
Nicol has quickly risen to prominence at Starbucks, overseeing a series of leadership changes and working to improve the in-cafe experience for customers. At least three Starbucks executives have left the company since his tenure began, including the leaders of the company’s North American and coffee divisions. Global chief merchant and product officer, a position Narasimhan recently created and held, also resigned, and Starbucks declined to fill the role.
“Strategy, simply put, is about making some strong choices and then having to execute like crazy,” Nicol said at an internal forum in September, with a replay of the story on Wall. Viewed by Street Journal. Changes need to make the brand better, he said, and leaders will evaluate the impact on customers and employees.
Nichol said that unless well-thought-out processes are communicated to employees, a company’s operations can be thrown into disarray, drawing applause from Starbucks employees in attendance.
Starbucks has long prided itself as a premium brand that rarely offers discounts. Howard Schultz, the former CEO who built Starbucks into a global company, has previously said Starbucks needs to be careful with its promotions.
These days, a Grande Pumpkin Spice Latte in Chicago costs $6.25, or nearly $10 with additional syrups and flavors.
Late last year, as customer traffic at its cafes slowed, Starbucks ramped up offers and sales for its loyalty program members. The company ran BOGOs, 50% offers, increased loyalty points and other offers for about half a month in May, according to documents reviewed by The Wall Street Journal. In June, Starbucks began offering coffee and breakfast food combos starting at $5.
The company’s U.S. same-store sales improved slightly in the quarter ended June compared to the previous quarter, but were still down compared to the same period last year. Narasimhan and other executives said Starbucks needs to do more, but the promotions have helped win back some of its customers who have left.
Some baristas and store managers said the barrage of promotions made it difficult at times to predict customer traffic and have enough staff. In a strategic update this month, Starbucks North America President Sarah Trilling said the Starbucks chain wants to scale back its offers and give baristas more time to deliver fast service and accurate orders. Ta.
“We know that the broader Starbucks benefits offer we’ve had in the past has been difficult,” Trilling said.
At a company forum in September, Nicol told employees that he has been visiting U.S. stores in recent weeks to talk with employees and customers about the Starbucks brand, focusing on serving high-quality coffee in a welcoming environment. He said he was doing it.
“We’re going to be a community coffee house known for great coffee,” he said.
Email Heather Haddon at heather.haddon@wsj.com.