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Starbucks plans to end price mark-ups for adding non-dairy milk to lattes and cappuccinos served in its US and Canadian cafés, as new chief executive Brian Niccol attempts to stem a sharp decline in customer traffic.
The world’s largest coffee chain said the change, which will apply to company-owned stores, would lower prices more than 10 per cent for patrons who ask for non-dairy alternatives such as soy milk, oat milk or almond milk in their beverages.
The elimination of the mark-up, typically about 70 cents to 80 cents, was one of several changes Niccol announced on Wednesday after the company reported dismal results.
Starbucks suffered a 6 per cent decline in US same-store sales in the three months to September, with the number of transactions falling by a tenth. Meanwhile, the average customer’s bill rose 4 per cent. Morgan Stanley called it “a remarkably poor quarter, no matter how one cuts it”.
Niccol was hired away from restaurant chain Chipotle Mexican Grill to revive Starbucks’ fortunes. Investors have pinned hopes on his leadership, sending the coffee chain’s shares up more than 25 per cent since his appointment was announced in mid-August.
After an initial fall, the shares were up 0.6 cent in after-hours trading on Wednesday after Starbucks published more information on quarterly financial results first released last week.
Niccol has said Starbucks needs to fix its pricing and whittle down an “overly complex” menu, which slows down service and stresses out baristas. “We’re working to make every visit worth it for our customers with straightforward pricing, timely service, and a more consistent, enjoyable café experience,” he said.
In another move aimed at cost-sensitive customers, Starbucks said it did not intend to raise menu prices at company-owned North American stores over the rest of the current fiscal year. Just over 11,000 of its more than 18,000 stores in North America are company-owned.
In another menu-simplifying move, Starbucks next month will stop selling olive-oil infused coffees that were the creation of Howard Schultz, the longtime leader who built Starbucks. The company said the decision was taken before Niccol’s arrival.
Niccol has previously outlined his plan, which he calls “Back to Starbucks”, in broad strokes.
In an open letter after he joined last month, he said Starbucks shops had drifted from their roots as inviting community hubs and sometimes felt transactional and hectic. Wait times for drinks had lengthened and the list of drinks and foods had become overly complicated, he said.
In a video released with last week’s dismal results, Niccol said Starbucks’ strategy needed a “fundamental change”.
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