The reason why we're in the midst of a turnaround is we kind of just lost our focus. You know, the focus for Starbucks historically was all about creating that third place where there's a moment of humanity, whether it was between work and home or whether it was a place that you just wanted to have a moment.
You're one year in. Clearly one of the most iconic brands in the world. Pretty familiar to this group, as you saw by the show of hands. You've called it a turnaround. What's the problem you're trying to solve?
Yeah, well, first thanks for everybody that went to Starbucks in the last week. I saw we got some work to do where you go more than once, but yeah, look, the reason why we're in the midst of a turnaround is we kind of just lost our focus. You know, the focus for Starbucks historically was all about creating that third place where there's a moment of humanity, whether it was between work and home, or whether it was a place that you just wanted to have a moment. And, you know, I would say COVID really kind of took the soul out of Starbucks because the challenge became, well, maybe you're not supposed to socialize the way we historically had encouraged people to socialize. And I think we were slow to recover coming out of COVID, and we made some decisions that started to pull, I think that third place experience, those moments of connection, those moments of humanity in the store, out, and we came too much focused on transaction and convenience and not enough on community, connection, craft, the things that really are unmatched at a great Starbucks experience.
But let's talk about that a little bit, because you do have the people who use Starbucks as a third place. Then you have people like me who love the app because I can order my coffee, get there right when it's ready, minimize the amount of time, and grab it and get out of the store as quickly as possible. Those are very different customer groups.
Well, they are, but I think at the end of the day, we will get more customers to do the grab and go experience if the way the company's defined is through its cafe experience. I do firmly believe that even if you wanna come and grab and go, you'd rather grab and go from a place than a soulless experience. And you know, if you did go by 24th and M, you know, that's an example of a place that got caught up in a remodel where we removed all the seats. Now the good news is, the team that's in there provides tremendous connection. Hopefully when you walked in, you were greeted.
They were great. By the way, they don't do that in New York. We'll get back to that. At 24th and M, they were fabulous. Greeted me by name.
You know, we're working hard on that, Alan, we'll get there. But I do believe, you need to have these access points, right? The drive through, delivery, mobile order pickup, the cafe. But I think the thing that defines the soul of this brand is the third place experience, that great seat. I think every one of our coffee houses, for the most part, should have a spot where when you walk in, you see a seat and you're like, when that person gets up, that's gonna be my seat. You know, I also believe there should be an element of like, they know the barista, whether they know them by name, they feel like they know them. And that ultimately creates this community connection that frankly, I don't think you get anywhere else. And I also do believe, I just saw like Australia banned social media for people under the age of 16. What I've seen over and over again is whether you're 16, 12, 24, 40, 80, people like to be around people. Even if that means they're not actually gonna socialize with other people. Like I've seen plenty of times, a person's in their headphones, on their computer, they could do that anywhere. They choose to do it in a space where it's a public space. And if you go back and look at time, right? The Spanish steps, people loved being around people. So when you go around the world, you see these places where humanity likes to have connection. And I think we can bring that to life.
And you don't think that conflicts with the desire for convenience?
No, we should be able to do both.
You think you can do both. You know, you and I had this conversation at the beginning of the pandemic when you were at Chipotle. The way you solved it, as I recall, the way you solved it at Chipotle is say, we're gonna build a separate kitchen. We're gonna deal with the takeout business over here, so as not to disturb the in-store experience. I mean, have you thought about that for Starbucks?
So it's a similar challenge at Starbucks. The difference is, one thing I've learned over the last year is our espresso is really the thing that we have to organize. So that if you're ordering in mobile or you're ordering in cafe, we can sequence those orders correctly so that we're on time for the mobile order. And then we're also timely for the customer that's in cafe. And you can do both of those things. We call it our Smart queue technology, which literally is just sequencing orders. So that our baristas are set up to be successful. The other thing we're testing right now too, is allowing you to schedule your order. So if you know you want your coffee at 5:30 AM, ideally it takes out some of the unexpectedness if you can basically pre-order that 5:30 AM coffee. 'cause now we can already queue the orders.
You just feed it into the queue at the appropriate time to make sure it's.
That's right, so then the ticket comes out, and then the barista, it doesn't matter to them whether they're doing a mobile order or a cafe order, what matters though for the customer is the mobile order expectation is you gotta be on time and accurate, the in cafe customer, they want a little bit more connection, and then they also want to know that you're going to be timely.
And what's the breakdown between the I want convenience customer and the I want community customer, and is it changing?
It's changing, so the way to think about it is, 40% of the business is drive through, 30% is mobile, and then another 30% is cafe.
So 70% are there to get their coffee and move on. And is that growing?
Correct. But remember, 60% are coming into the store because the mobile order pickup customer comes into the cafe. And that's why I think it's so important for you to have that experience when you come into the cafe.
You know, it's the first year, I'm sure you know, a giant company like this, the first year, lots of things happened that you didn't expect. What's been the hardest thing about this turnaround for you so far?
You know, actually, I was just talking about this with Mike a little bit. I just underestimated the scale and the magnitude of people. You know, we've got 250,000 employees and we call them partners in the United States. So in order to get everybody on kind of the same path, it takes a little bit longer adoption curve.
And you have like 50% turnover too, right?
We have 50% turnover, which, but luckily our coffee house Leaders, the turnover is more in the 20% range. So those are the folks that are actually running the coffee house, setting the culture, setting the standard. So, you know, the thing that's been nice is coming up with a simple strategy around the idea of Back to Starbucks, just by saying back to Starbucks, that gives a visual understanding to our partners of what we're trying to achieve. Because everybody remembers like a "Friends" episode or that coffee house experience that by me saying back to Starbucks, that kind of hearkens that memory of what I would call the barista customer connection that we're after. And look, there's a lot of other things that have to happen in order to enable that. But if we just get to a place where every single one of our partners greets you when you come into a coffee house and creates a handoff moment, we are way ahead of all our competitors.
So let's talk about the people challenge, because that's, as we talked about last night, for all the conversation about technology, it's usually the people challenge that becomes the hardest. You got 250, more than 250,000 people, right? We've already talked about 24th and M, whatever you did, it was right. But most of the stores I go to in New York don't have the same level of friendliness. How do you get that consistent across, what, 40,000 stores? 250,000 people, how do you possibly do that?
You know, look, the way my experience has been is you do have to get people to understand what the standard of customer service is that we're after. And one of the things that really kind of bummed me out or surprised me when I first got to Starbucks is I asked the question, who would you say is a great customer service company? Or maybe I'll ask this audience, you know, who would you say is a great customer service company? Anybody?
Nordstrom.
Chick-fil-A.
Home Depot.
Disney.
Disney, okay. Four Seasons. You know what's interesting is some of those companies, some customers would say maybe they were in the past, others would say maybe they're having a moment. But I don't think there is the defining customer service company like there was when I remember Nordstrom's actually was. And I actually am disappointed nobody said Starbucks. Because if you go back 10 years ago, you would've said Starbucks and I simply believe we are on a mission to be the defining customer service company in the world. And when you set that standard for those that wanna join your company, you're also sending a message of who we want to be working at our company. If you don't like customer service, you're probably not gonna like working at Starbucks. And so we're in that transition of getting people to understand that. And it was actually funny, I was reading a Reddit thread on people that were going through the interview process, and they were like, hey, I'm about to have my second interview. And we've instituted where our district managers also have to be part of the interviewing process. They're like, what's one of the questions I should be prepared for? And they said, oh, you better be prepared to talk about how you like customer service. And so when I saw that in the Reddit thread, I was like, okay, we're making progress.
The message is getting through.
On what the standard of services that we want.
Do you have any way of measuring it? When I walk in and out of a store in New York and nobody looks at me, is, do you know?
Well, so we've just started a new program, it's called the Grow Scorecard. So if you go into a store, we're actually keeping very simple metrics in place for people where one of them is basically employee, or I'm sorry, customer satisfaction. And so that is one of their key metrics that they have to get a score on. And it's twofold, one is customer feedback, the other one is just reading Yelp reviews, Google reviews. Frankly, this is where we're using technology to have a better understanding of what people are saying about each individual store. But look, the early signs are, we're making really good progress. It sounds like I have some work to do for your.
Yeah, I'll tell you which stores. But 24th and M is great, you need to go over there and congratulate them. Further south, I started south, I could, but I know it's only a small portion of your employees who are unionized. But is the union a problem for you in making the people transition?
You know, look, obviously people have the right to unionize if that's what they believe is right. The thing I've decided that we're gonna make sure we focus on is we have to have the best job in retail. And when you look at what we offer at our company, there is no doubt we are providing one of the best jobs.
Still true, that's still true.
100%, you know, look, we offer healthcare benefits when you work 20 hours. You can get a four year college degree from Arizona State completely free.
Wow, any barista who's worked 20 hours.
As long as you get 20 hours, you know, we have parental leave for our hourly employees, 18 weeks, just like you find in most big corporate jobs. So, you know, when you stack up all the benefits and then the pay, which by the way, you know, we pay well above minimum wage across the country. And in fact, on average, I think our wages are 18, $19 an hour. And then you layer in all these benefits, I know you mentioned 50% turnover, for everybody, a comparison in our industry, most people have 120% turnover. So just the fact that people aren't turning over also indicates what we're providing. And I was speaking with somebody earlier before, you know, she mentioned to me when she was between college and getting her journalism degree, you know, or journalism work, you know, she was working at Starbucks because we provided her an opportunity to work for 20 hours, get full benefits. I think she even said she was a coffee master, which is, if you see people wearing a black apron, they've gone the next step. So, you know, I'm really proud of what we provide. And we're committed to continue to make sure.
A lot of that, of course was central to the vision of your founder. Can you talk about your relationship with your founder?
Yeah, sure, Howard and I, you know, it's been actually a really good relationship. You know, he's been very supportive.
Some of your predecessors had a little problem with that. I guess all of them.
Yeah. Look, you know, I've had the opportunity to work with founders at Chipotle or the founder at Chipotle, and now I'm having the opportunity to work with Howard. And the one thing that you have to give your, you know, tip of a cap to, is he went from six stores to 40,000 stores around the world and created this idea of espresso in the third place that just frankly didn't exist. So, you know, we probably won't agree on everything, but at the same token.
So you do disagree with him.
Oh, of course, I mean, I disagree with my wife, so it's like, we've been married for 25 years. So it's like, these are healthy tensions. And I think, you know, the good news is he's actually becoming somebody that I think, you know, you need these mentors as you progress your career. Where, you know, you can lean into, like gimme the history on that. Why did you make the decision that you made? And you know, for the most part, we can agree to disagree sometimes.
I probably catch up with him once a month.
Yeah. That's great. Let's talk about politics a little bit since we're in Washington, how are tariffs affecting your business?
Well, fortunately for us, Green Coffee has now been excluded from tariffs, which I guess that happened about a month ago. But prior to that, you know, it was a challenge because, you know, we were sourcing green coffee from, you know, Brazil, Columbia, really kind of all the countries you would expect. And so that was challenging because we had Brazil, which is the biggest supplier of coffee at a 50% tariff for a while. So it presented some challenges, but for the most part, we're a pretty local business once you get outside of green coffee.
Yeah. And were you personally involved in securing the exemption for coffee?
I mean, I was definitely an advocate for it.
Did you meet with the president? They gonna name the ballroom after you? Did you make a big contribution?
No, no, no. You know, fortunately, some of the folks that did a lot of the work are actually here with me. But, you know, it was actually a simple case that we were making, which is you can't grow green coffee in the United States. And fortunately for Starbucks, we roast all the coffee in the United States. So we have roasting facilities across the United States that then roast all the coffee that you experience, whether it's in the grocery store or at a Starbucks, so.
