Starbucks' Next Challenge: Making Sure All of Its Food is Available

Dow Jones
Jul 30

Starbucks believes that more cafe labor and behind-the-scenes technology is helping its U.S. customers get their drinks faster.

Speedy order fulfillment is key to the coffee giant's turnaround efforts, now in its second year under Chief Executive Brian Niccol. To accelerate service, U.S. stores are nearly all fully staffed, with more than 98% of scheduled shifts filled. The chain has also rolled out an order scheduling algorithm across stores to better sequence incoming transactions.

The chain is now delivering a majority of its in-store and drive-through orders in the U.S. within four minutes, one of Niccol's goals. It's shaved 24 seconds from cafe orders and 12 from drive-through ones in its recently completed third quarter.

"It's a notable improvement," Starbucks Chief Operating Officer Mike Grams said about the chain's speed of service in an interview. "When you go through turnarounds like this you look for the proof points."

Niccol recruited Grams out of retirement last year to oversee Starbucks' overhaul of cafe operations. The former Taco Bell executive last year established a protocol for baristas -- from cup writing to greeting every customer -- to improve customer services and build back sales.

Executives said the improvements, which Starbucks calls its Green Apron Service standards, are working, though investors are waiting to see how friendly baristas will translate into more profit for the chain. The chain's profit is starting to rebuild this year, but down from levels before Niccol's turnaround work.

Starbucks Wednesday reported earnings and sales that exceeded analysts' expectations for its quarter ended June 28, and raised same-store sales and earnings guidance for its fiscal year. The company's shares rose 6% after-market.

WSJ: What inning would you say you are in with the turnaround?

Grams: I think we're in the fourth inning. Customers are returning to Starbucks. You can see it everyday in the transaction growth. We still have so much opportunity to be consistent every hour, of every day. We haven't scratched the surface of innovation coming for the afternoon.

WSJ: What's still on your bucket list in terms of improving operations?

Grams: Consistency. In August we're going to celebrate the one-year anniversary of Green Apron Service. We're also going to recertify every partner in the system on the fundamentals because it's fueling the recovery.

WSJ: Some of your new drinks seem more complicated to make. How does that impact service times?

Grams: I don't think it's generally more steps. If it sells, our baristas love it. It's more of a balance of listening on the front end of what customers are telling them, what are products that really resonate and then doing our very best to get people excited to train.

WSJ: Are more people actually lingering in cafes longer?

Grams: I anecdotally can see it. But when we do the [store renovation] program, you do see the usage increase. We're also seeing transaction growth, which is really rare from an investment in seating and experience.

WSJ: Being in stock with food has been a challenge. Where do you stand on that?

Grams: Food availability has been a big issue at Starbucks in the past. Last quarter we finished at 99% product availability. We provide an algorithm forecast to our stores, but they now have the ability to make adjustments that they see fit on what products are moving. Previously that may have been held back, to say you can only order so much.

 

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