The phase we're in is we got to get things turned around. We got to get what I would call the soul of the business back and this connection back. We are having to reintroduce the brand to people. We got to change the conversation of what the Starbucks Coffee Company stands for. You know, if people just call us a corporation, I'm not doing my job. We're going to use marketing to do that and we're going to use experiences in the store to do that.
I'm Bob Saffian. I'm here with Brian Niccol, CEO of Starbucks. Brian, thanks for joining us.
Yeah, great to be here, Bob.
Since coming to Starbucks a few months ago, you've instituted a slew of changes from the menu to the bathroom policy. You just announced quarterly earnings this week. You've been very busy. Do you rely on extra coffee to keep up the pace or is it natural adrenaline?
My caffeine intake has definitely gone up since I took this job, but I love the energy of the turnaround. And you know, look, the coffee is pretty darn good too.
So you've called your strategy 'Back to Starbucks' and it's included the return of a condiment station, the return of handwritten names on cups. It can sound like a lot of small details. Is that all that's required, tuning the details?
Yeah, look, I mean, we are in the retail business, we're in the customer service business, and anybody that's been involved with that knows the details do matter. And the reason why the details that you just mentioned really matter for Starbucks is frankly those details are our point of difference. It's how we get to another level of connection. It's also how we kind of create a little bit of the magic, right? What turns the coffee and that craft beverage into something really special is the moment that potentially you have in our store, the community of the store, the moment you might have with a barista, or just the moment where you grab your cup and unexpectedly, you know, there's a little smiley face on your cup and it just changes the entire attitude of the customer. And you know, obviously you got to have a great product, you got to have a great experience, but if you have those little moments of connection, it just adds so much more.
Yeah, well, it's always interesting how in, you know, food-related businesses, like, of course the product has to be satisfying, but so much of it is about the experience, about getting the experience to feel memorable, satisfying.
Yeah, that's right. And you know, look, I think one of the things that veered Starbucks a little bit off was the whole mobile ordering, the COVID situation. I think it just really took a lot of the soul out of what this business is all about. And you know, I'm sure Bob, like me, I remember when the first Starbucks kind of came to my neighborhood and it was a moment for our neighborhood, right? I was living in Cincinnati, Ohio. I was working at Procter and Gamble at the time and we were like, what a great spot. I also really loved it when they were like, 'All right, Brian, you know, Grande Americano with an extra shot,' and I'm like, 'Yeah, all right, that's me, I'm in.' I think just what happened with mobile ordering, it kind of chipped away at a little bit of that soul and that connection because we went to labels and we stopped writing on the cups and you know, we started looking at how you can remove seconds from the proposition as opposed to how do you maintain the experience and the connection and the integrity of what goes even beyond a great cup of coffee.
There is this kind of impression that there was like an earlier Starbucks heyday, but it's not like the stock is that far from its all-time high. So like when you think of the sort of the life cycle of the company, what phase do you feel like it's in or like do you see phases ahead?
Right now, the phase we're in is we got to get things turned around, at least in the US business. We got to get what I would call the soul of the business back and this connection back and the partner experience back so that the customer feels the brand again. And I think when we get that back, there's tremendous growth in front of us because frankly, the reality is so many things kind of isolate you as opposed to bring you together. I think people want to get out of the loneliness phase and get back to the connection phase. And I've had the opportunity to travel around the world and it's true everywhere I've been. You know, whether it was Italy, which was also a little bit surreal because, you know, the whole Starbucks original idea came from Howard visiting Italy and here I am back in like Milan seeing people walk around with Starbucks cups and it just demonstrates this is one of those human truths that just connects people all around the world. You know, connecting over a cup of coffee or connecting with your barista, it's just a human truth.
You mentioned Howard Schultz, the founder and multiple-time CEO there. Do you talk with him about what you're doing or is it kind of you're on your own?
Howard's been great. You know, I think I'm fortunate that you still have a founder that can share the history of how Starbucks went from, you know, the one store in Seattle to the iconic global brand that it is. You know, he doesn't want to run the company, he doesn't want to be involved in the day-to-day, wants me to do that. But he's available for me to say, 'Hey, I'm just curious, why did we do this? You know, what was your thinking when you introduced food into the cafe and how it competed with coffee? And what was your thinking when we went from hot to cold?' And you know, it's great to get that insight.
I mean, it sounds like you're sort of systematically going at these pain points for customers, you know, and resolving them and sort of making them work the way maybe the way they used to. Shorter wait times, more welcoming in-store environments. One of the big pain points that is kind of tough, like rising prices. You don't control inflation. Proposed tariffs would hit coffee imports. Are there things that you can do if you don't want to pass price increases along? Like, are there things that you and your team are preparing for with the prospect of these tariffs coming?
I think there are opportunities for us to eliminate costs that don't add value to either our customer or our partner or our product. And so we're working very hard all the way back to frankly the way we grow the coffee. What can we be doing to be more efficient, more effective so that you don't have to pass on some of the inflationary costs that we might face. With that said, I do believe one of our key objectives here is to create a brand that's so valuable that we have growth that can help offset some of this challenge too. Where I think sometimes businesses get in trouble, and I think Starbucks might have gotten a little bit of this trouble, is they went after cost at the expense of the experience. That's where then you start to tread on, are you ruining what the brand stands for, what the brand promises, and what the brand can deliver. And so we just got to pull back in those areas and make sure that we are only really focused on cost reduction in those places that don't add value to the proposition.
During Starbucks's life, there's been an increasing proliferation of neighborhood coffee houses. How much do you think about like these hyper-local cafes as your competition? I was watching your new commercial, 'That's Not My Name,' and it ends with a tweaked name for you guys as Starbucks Coffee Company, which sounds a little bit more local. Like, is that what you're trying to signify?
The reality is Starbucks started out as a coffee company and at the heart, that's what we are. Like, again, I went back and did a little history lesson and when Starbucks first started, it had a very simple statement: to be the purveyor of the finest coffee in the world. And we still believe that in a really big way. So I think it's important to make that statement that we are the Starbucks Coffee Company. And what I want people to understand is we are so committed to the coffee quality that if we apply that same commitment of quality and craft to the food that we do, the teas that we might provide, I think that just travels. But first and foremost, we're a coffee company. And I think it's important for people to be reintroduced to Starbucks from that point of view because I think we've forgotten to tell people that over the last, you know, let's call it last decade.
I mean, it sounds like you need to focus more now, you need to narrow down a little bit what you're doing, get a little bit more streamlined, and then maybe once that is sort of aligned, then you could start adding things back again or adding new things.
We're going to continue to be an innovative company, but it's just you're best served to innovate when your core is strong. If you are innovating to try and compensate for a weak core, usually good things don't happen. You end up just drifting. And my point is, like, let's have a strong, healthy core and then we can innovate from there.
How much of this is an echo of, you know, you applying the lessons that you applied at Chipotle? Or is every retail brand different and like you can't necessarily translate across quite that way?
I started my career at Procter and Gamble and one of the things that was kind of a just a fortunate blessing is I had the opportunity to work on multiple brands early in my career. And you know, I remember one of my managers early on said, 'Hey, look, when you shift brands, one of the first things you got to find out is why do people love that brand.' And once you understand why people love that brand, drive that point. Then you also have to understand, well, what is it that I provide that enables me to make money. Once you kind of understand what makes your brand special and how you are able to get the right economics for what you're providing, that's what you got to hold on to. And I've taken that approach to all the businesses that I've had the good fortune to be a part of or had the opportunity to lead. I was set up at a place in Chipotle where, again, great brand, great product, we just drifted a little bit. We got the brand back on track, we got operations in order, and our people became empowered. Big success. You know, I think similarly we can have those principles apply. Obviously, we're going to do it in a little different way. This is, you know, coffee and the romance of coffee, which has got a little, I think, different appeal than what I was doing before.
The Starbucks role also has a different kind of spotlight on it than Chipotle. I mean, already there have been media stories about your private travel and about your compensation. Like, how different is that kind of thing than what you saw at Chipotle?
It's wildly different. I, you know, I probably underestimated how much people would be interested in what I'm up to. I was excited to have the opportunity to work on a global iconic brand and make hopefully a big difference. The good news is people care a lot about this business, a lot of people use the brand, and so therefore they, you know, have an opinion on what's going on. And I was definitely surprised by how much coverage and all the different stories that pop up. But at the end of the day, you know what, I'd prefer people caring than not caring.
And you're not going to move the headquarters to Southern California?
No, I don't have any plans to do that.
I want to ask you about international. What you mentioned, global. China's been a major market for Starbucks, only recently passed there by a local competitor, Luckin Coffee. With 'Back to Starbucks,' are you shifting attention away from Asia or is that a fight you still want to win?
Yeah, no, look, the whole 'Back to Starbucks' strategy is more about a regrounding of the brand globally. I just did a trip to Tokyo, Seoul, and Shanghai, and the 'Back to Starbucks' strategy applies. Now, there is definitely localization that needs to take place in both menu, pricing, architecture, product, and food innovation. But the fundamentals of, look, a moment of connection, a great third place, a barista that's engaged and demonstrates caring, applies. Frankly, I think there are some things the US business can learn from what we're doing in these other markets. Some of these places are ahead of the US business on being what Starbucks should be.
Yeah, I was curious whether you saw a similar kind of disconnecting in those global stores that you saw and have seen in the US or whether it didn't quite drift as much there.
Mobile ordering is just not nearly as prevalent in the business as I've seen in the US, with the exception China's got a pretty developed digital business. But like in Italy, Japan, Korea, not as much, although it's developing. But they've done a nice job of keeping the channels separated so that they aren't competing and creating a conflict, unlike in the US. We really didn't do a great job of keeping those businesses orderly and separated.
Yeah, it's, technology is a great tool and helps make things easier for employees and customers, but it doesn't always make things less complicated.
