All right, welcome to a new episode of the Opening Bid Unfiltered podcast. I'm Yahoo Finance executive editor Brian Sozzi, and like I always say, this podcast will make you a smarter investor, period. And a really cool episode on tap here. Dreamforce in San Francisco, of course, that is Salesforce's big annual tech gathering where they talk about AI, the future of technology, and you never know who you're going to find here at Dreamforce. And I didn't think I was going to find this guy here, but he is here. It is Starbucks CEO, Brian Niccol. Brian, good to see you in person. I've been seeing you in, I don't know, remote digital boxes for six or seven years. It's good to actually physically see you.
Yeah, it's great to be here, Brian.
What brings you to Dreamforce?
You know, well, obviously like any other business right now, we're all trying to learn our way through how AI impacts the business. And I constantly say to our organization, we need to be a learning organization. We need to be an experimenting organization. And this is an opportunity for me to learn more about what's going on in the space and understand from others how potentially they're using it in their business and then maybe what the application would be for Starbucks.
How are you using AI in Starbucks?
So right now probably the biggest thing we've done is this kind of barista assistant. It's called the Green Dot. You might have heard us talk about it, and it really helps our store leaders navigate how to run the Starbucks. So, you know, if you run into an issue with a piece of equipment or how to build a certain drink, it's a really fast way for us to then give them support with AI to get them to the right answer faster or to the right solution faster. But we're also experimenting with it in other places from voice to vision, you know, also across the business as it relates to, you know, inventory, supply chain. So there's a lot of neat things that we're experimenting with. Obviously, forecasting, scheduling, but none of those things yet are at scale.
How, you know, I was thinking, there's a figure robot. Like, are we nearing where there's robots in the coffee store? Like, is that going to happen?
We're not near that right now. We just put more partners back into our stores to give people a great...
Not robotic, right? Not robot.
Not robotic. These are real people that are here to give you a real experience with, you know, real craft.
Is AI unleashing more productivity in your business? Because that's the undercurrent here. Like all this stuff is great. A lot of companies, I mean Walmart, you're on the board. They just announced a big deal with ChatGPT. Like these things sound great in press releases, but like, are they actually working and doing stuff?
So we're still in the early days of this. But I believe there is definitely opportunity here to help us get things done faster, more efficiently. To what scale that is, to be determined. And this is what I mean by experimentation and learning. You know, but we're definitely already seeing a big impact in our technology area. You know, the ability to get code done so much faster is real. How we do that, we still need to figure that out. Because, you know, we're still working from some legacy systems that we need to figure out how you layer these things in or work and partner with it.
You know, it's amazing to me. I originally met you, I think, when you were at Yum Brands at a New York City investor day 2016 or 2017. I was still young in my career. I think we just talked about menus.
Now we're sitting here talking about like AI and how...
We're probably talking about using social media just at the start of that, right? So it's just absolutely mind-blowing.
It's true. So you are over a year into the role of CEO Starbucks. Finish a sentence for me. The Starbucks of today is...
You know, I think the Starbucks of today is getting back to being a great experience for customers. You know, we've switched away from, I think, being focused on efficiency and tasks and reoriented the business to being a great customer service company again. And that means personalization for, you know, what's your drink, Brian?
It is now the protein iced coffee.
Okay. I mean, I go right out of my Hyrox training class and now I'm having this protein drink. It's a little expensive. We'll take that in a little bit later, but still it tastes good.
Well, you know, look, I started my day with a protein latte, vanilla latte. So obviously there's going to be more innovation coming that I think is very much on trend, but I think what you'll also find is our baristas are better set up to give you that great experience for that personalized drink that you want to have. And I think that's where Starbucks is today versus a year ago when I talked to our partners. They didn't feel like they were set up for success to give people the experience that they actually expected from Starbucks.
I've joked to you in the past like I followed how you rolled out items at Chipotle. They called a stage-gate process. I would hear about this a lot. How have you changed the innovative process at Starbucks? Because before you, they would try this energy drink and I would order this pink and blue drink. It tasted like nothing. It was as advertised. Like what are you doing different?
Yeah, look, we are using a stage-gate process. You know, it's one of those things that I think when you put some discipline in place around innovation, you end up with bigger innovation that can be executed correctly. And protein's a great example. You know, that really went through our process. That's really the first item that we had the ability to say let's take this from idea all the way to scale. And on our way, we started in five stores. We got a lot of feedback from those baristas on how to make it better. When we got that feedback, we then put it into, I think it was around a hundred stores, and then we better understood what's the supply chain necessary, what is the right way to build this, and what is the way that customers want to order it. And so you've seen us make some changes in the app. You've seen us make, I think, some smart decisions in how it's merchandised in the store. And then most importantly, our baristas are set up to execute it with excellence every single time.
What's next? Not necessarily just on the coffee front. How are you reinventing that bakery case when I walk in?
Yeah. Well, look, I think you might have heard me talk about this from the beginning. I said, look, we got to get back to winning the morning. And I think we've done a nice job of setting ourselves up to win the morning first from an experience standpoint around coffee and beverages. Now, we're going to turn our eyes to how do we make the bakery case relevant and more relevant for that morning experience. And so, we've got a new bakery case that will be coming out with, I think, more artisanal pastries.
You're not doing away. Are you doing away with my egg bites? They don't. That's a staple.
You know, so this is more focused on how do we get the pastries right. We've already got some great innovation coming on what I would call like the protein-forward breakfast items. The egg bites platform is a home run. We need to figure out we continue to leverage that going forward.
What else could, what else protein can you sell, right? Food.
You know, look, this is where I think we now have to focus on how do we build an afternoon day part. And so it's like win the morning, let's start building the afternoon. And in the afternoon, I think we have opportunities on food to get the right selection of food. And then I also think we have opportunities on drinks to figure out how we can bring the right craft with the right flavors, customized energy. As a matter of fact, even with those drinks and flavors. So, you know, I'm optimistic about what we can do on the afternoon day part while we continue to make great progress in the morning day.
There was a Starbucks and I think it's still by me in the city at one point they were serving alcohol. Are you a big believer Starbucks should be serving some form of drinks with alcohol in it?
You know, look, I think that's a great example of experimentation that's happening in our roasteries and reserves. We have some fun ideas. You know, I've heard about the matcha margarita.
The espresso martini is a crowd-pleaser, but there's some fun things we can do, right? Matcha margaritas. You know, the pink drink Cosmo. So, I think there's some fun things we can experiment with alcohol on. You know, it's still at a very small, small, small level, but you know, when we strike the right chord, if we have the ability to scale that, we will scale it.
Now, you're also remodeling a lot of restaurants. You know, how many are you going to remodel and what is your hope for these remodels?
Yeah, look, you know, we've done about a hundred so far. Our plan is for this fiscal year to do well over a thousand. And, you know, these uplifts is what we're calling them because it's really focused on the front of house experience. Meaning the seat you would have...
Yeah, there'll be rugs, there'll be drapes, there might be some plants. The purpose is to get back to having that great third place. You know, Howard and frankly Starbucks in the beginning of this concept recognized people wanted to spend time in a third place between home and work. And we got to get back to giving people that environment. And I think it's important that you walk through that environment. Even if you're going to grab and go or if you're pulling up to the drive-thru, when you see through the drive-thru the coffee house over there where maybe next time you're like...
Yeah. Well, next time you might want to get in there, right, and grab a seat.
So, I love what's happening. You know, I always say to people, every coffee house needs to have a couple seats where everybody walks in and says, 'That's my seat.' Like, when that person moves or if it's available, like, 'That's my seat.'
Have the times changed, though? Let me just push back a little on this. I see the next generation, let's say under 20, they're glued to their phones and they're just in a rush. Do they really want that third place? Like is there...
I think so. I mean, if you look in our cafes and especially like after school, call it the 14 to 18 year old crowd, they need a third place to hang out with their friends and they want our drinks. So, absolutely, you know, and I think actually if we have more of these third places, you know, maybe I'm being a naive parent here a little bit, but I hope they would put their phone down and connect with each other and we're going to provide them that space where they can do it. You're already seeing schools adopt this where, you know, less and less kids have their cell phones in the school because they want the kids to connect not only with their teachers but with each other. Like you can see a marked difference if you walk into a school and, you know, cell phones are not part of their day at that lunchroom because, you know what, you hear a lot more conversations.
I think they've taken them away. I'm in Long Island in New York. There's no more cell phones.
No more cell phones at all there. So, you know, I know I've seen this in various school districts and I think it's actually, you know, going to be something that the kids are going to find they really enjoy and then they're going to really enjoy when they have another place to do it outside of school.
Do you want a Starbucks to go back to, was it the late '90s, Friends on and people just hanging, spending 8 hours at a Starbucks, I don't know, living their life. Is that what you're going for?
You know, look, eight hours might be a bit much, but I think there's nothing wrong with people finding a moment to connect with each other or, you know what, sometimes you just need a moment for yourself. And, you know, do it in a place, and I've seen this actually, Brian, I think it's as much a feeling like you're part of the community where if you sit there and just seeing your community come in and out and you get to say hi to the neighbor or the friend or the family member, maybe you haven't seen all week or the past month, but you see him in passing in a Starbucks. That's a moment of connection.
They have to buy something. They're not, those, we're not going back.
Our stores are for customers. You got to make some... Our stores are for customers and our stores are all about giving a great customer experience.
You have rebuilt the management team. You've changed how even the earnings call. You've made a lot of changes over the past year. Like what have been some of the underappreciated challenges, you know, for you in that first year?
You know, look, it's always not easy to change, I would say, culture and the way of working. And the way I find you have to do that, it has to be leader-led. So it was really important for me to get the right people into the right jobs on my leadership team so that we could start cascading the way we wanted to work going forward. And I think we now have a great team in place. We still have, you know, an area where we're looking, we had our head of technology just retire, so we'll replace that role, but once we get that role replaced, you know, and we've got our team in place, and now it's about driving culture. It's about executing against the strategy and, you know, I'm always focused on making sure I have leaders that in their respective area are world class and world class both in the work they do and how they do that work.
When you were turning around Chipotle that came after what was the E. coli whole scare or incident, whatever it was. It was a smaller chain. Like, is it hard to move a company like a Starbucks as fast as you want? It's not just the size of the US business. This is a global brand that has impacted our lives for decades.
Yeah. No, no doubt. This is the...
You still have all your hair, Brian. I know you're doing this, man.
Well, look, you know, here's what I'll tell you. It is clearly one of the great global iconic American brands. You know, we have 40,000 stores around the world. But that's why the strategy of Back to Starbucks is so important. It's very simple. I think it's very clear so that everybody in every store, no matter where you are in the world, when I say Back to Starbucks, they know what I'm talking about. And, you know, they can rattle off the four key things that are happening, right? We're going to set our partners up for success. We're going to return to a great coffee house. We're going to have great craft innovation, right? So as soon as people understand what are we after, there's a lot of energy around it. And, you know, to me, that's what's most important. If I can get every single one of our coffee houses to be energized about the path we're on to becoming the world's greatest customer service company again, rooted in coffee, rooted in beverage, and rooted in this third place. You know, I'm really optimistic about where we can get to.
All right, hang with us, Brian. We're going to go for a very short break. We'll be right back.
All right, welcome back to Opening Bid Unfiltered here at Dreamforce in San Francisco talking some AI, a little coffee, a little protein menu with Starbucks CEO Brian Niccol. So Brian, I went into, to fly here. I took JFK out of New York. I went into the what looked to be a newly remodeled location or my coffee. They had a digital screen, like a touch screen on the wall like sequencing the orders.
I'm like, that makes a lot of sense. Like, what is the future of mobile order and technology?
Yeah, look, I'm glad you're bringing this up. So, you might have heard me talk about this. It's a behind-the-scenes technology that's happening. We call it SmartQ. And really, what this does is it, you know, remember, so in the airport, you don't have all of our access modes, but you do have the counter access mode and the mobile order pickup access mode. But in a lot of our stores, there's three access modes, right? Or actually four. You got drive-thru, you got delivery, you got mobile order pickup, and then obviously you have the counter. And unfortunately there was no order to that ordering system.
