Americans are addicted to caffeine but not to Starbucks, it seems.
When Chicago writer Natalia Nebel steps out for an espresso, for instance, Starbucks no longer comes to mind, even though she lives within walking distance to two of the coffee chain’s more than 17,000 U.S. stores.
“I used to go all the time and now I don’t go anymore,” said Nebel, 61, recalling her pre-COVID routine of setting up shop four days a week at a local Starbucks, finding it an enjoyable change of scenery and a comfortable spot to work. “I liked being around people in a different setting,” Nebel told CBS MoneyWatch.
But Starbucks’ appeal for Nebel faded along with the pandemic. “Once I stopped going, I didn’t really miss it,” she said, noting that she prefers the ambiance of the independent cafes in her Lincoln Park neighborhood.
“The whole concept got old. Starbucks started really feeling like corporate America in a way it hadn’t before,” she added.
Delaware resident Troy Turner also sees benefits to brewing at home, saying it’s relatively easy, quick and far less expensive to make “significantly better coffee than anything you’d get at Starbucks.”
The home barista community has gained traction online, with tutorials available on making coffee, noted Turner, 29, a leave and disability examiner who lives in Dover.
“A few years ago, when I was first getting into coffee, I was on the fence about Starbucks versus Dunkin’ Donuts, but I quickly got out of attending both places,” said Turner, a self-described coffee enthusiast.
Rare drop in sales
Nebel and Turner are not alone in forging a life without Starbucks, at least if the company’s latest earnings report is any guide.
The biggest coffee chain on the planet is losing ground with people around the globe, its first drop in quarterly revenue since 2020 recently showed. The slowdown in store traffic was particularly acute in the U.S., with same-store sales down 3% in the January through March period from a year ago.
Budget-conscious consumers are shelling out less on quick-service offerings, and that includes Starbucks, according to CEO Laxman Narasimhan.
“We continue to feel the impact of a more cautious consumer,” he said on an earnings call last week.
“Many customers have been more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent,” Narasimhan said. “We saw this materialize over the quarter as customers made the trade-offs, but being food away from home and food at home.”
The company’s plan to turn things around includes updating its app and mobile payment offerings, speeding up service, and overhauling its menu to lure customers back, he said.
“The consumer is starting to feel the bite of tighter finances, and Starbucks is one of those indulgent luxuries that people can easily cut out,” said Neal Saunders, managing director, retail, at GlobalData.
Schultz calls for “maniacal focus”
The financial setback last quarter also prompted some unsolicited advice from former Starbucks CEO Howard Schultz, who led the company for decades as it expanded around the globe.
“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,” Schultz wrote on his LinkedIn account on Monday. Starbucks should revamp its mobile ordering and payment app to “once again make it the uplifting experience it was designed to be,” suggested Schultz, who finished his third stint as CEO early last year but remains one of the company’s biggest shareholders.
According to Schultz, Starbucks will recover, but it’s “clearly not business as usual.”
“We always appreciate Howard’s perspective. The challenges and opportunities he highlights are the ones we are focused on. And like Howard, we are confident in Starbucks long-term success,” a Starbucks spokesperson said in response to Schultz’s remarks.
The “customer experience flags in a world where seamless mobile/digital ordering and throughput are emphasized,” Sean Dunlop, an analyst at MorningStar, said. “If baristas are constantly operating at 100% capacity, it’s challenging to snap out of that and ensure that a customer’s having a really unique experience — they simply don’t have the bandwidth,” Dunlop said.
If one looks at the long history of Starbucks, the brand in its early days was very much an experiential occasion, with consumers “going in, ordering a beverage just the way they wanted it and having a nice interaction with the barista, a nice feel-good experience,” said David Tarantino, an analyst at Robert W. Baird. “One of the downsides of mobile ordering is it becomes very transactional.”
Labor strike turns off some customers
Both Nebel and Turner mentioned Starbucks’ strife with employees as another reason they choose not to patronize the business, although most analysts downplayed the issue.
From Nebel’s perspective, a Starbucks cafe in Chicago’s Old Town neighborhood that used to bustle with energy and people now has fewer patrons and a downbeat atmosphere. “I don’t know that the employees seem that happy there, and maybe you pick up on it, too,” she said.
Starbucks and the union organizing its workers are currently in contract negotiations after a protracted battle that has the Supreme Court hearing its case challenging the authority of the National Labor Relations Board.
“It’s not implausible to surmise that the occasional consumer or a consumer with less affinity for Starbucks in general might shift a couple of visits, at the margin, away from the brand if they found labor practices particularly distasteful,” said Dunlop at MorningStar. “The great irony there, of course, is that Starbucks offers one of the best employee value propositions (wages and benefits) in the restaurant industry, so they’re being punished for labor practices that most folks partake in.”
Meanwhile, headlines about Starbucks employees not being allowed to wear Black Lives Matter attire tarnished the brand for Morgan Bissett-Tessier, a 31-year-old law school student and part-time school administrator in New York. The Brooklyn resident now avoids Starbucks despite the company reversing its dress code policy on BLM.
Starbucks “was never a regular thing for me because it was expensive, so it was a treat,” Bissett-Tessier said. “Now it doesn’t feel worth it.”
