Everyone loves Starbucks, don't they? Its cafes certainly seem to be everywhere. But behind that familiar green siren are stores struggling with declining sales, overworked employees, and a company badly in need of a fresh start.

Starbucks this morning, down about 1.5%. Starbucks is facing a walkout of more than 1,000 employees. There were a lot of excuses. It seemed like there was a lot of panic. I'll tell you what, though. You haven't been to Starbucks.

No, you haven't. The worst sales—We're seeing traffic levels that, outside of the pandemic, we haven't seen except during recessions. We started to see almost the equivalent of spaghetti being thrown against a wall to see what would stick.

Drink orders have become more complicated. The wait times are kind of obnoxious at times. It seems like, you know, one moment there was one CEO and things were going pretty well, and then suddenly the picture started to change. There have definitely been a couple of moments of 'What just happened here?'

Now a new CEO hopes to turn the company around by bringing Starbucks back to its roots—if it's not too late. The Starbucks story, as we know it, started in the early 1980s with Howard Schultz, who was working for a small

Seattle company that was selling whole bean and ground coffee. During that time, coffee for Americans was basically just fuel. Howard Schultz wanted to turn it into an elevated, European-style experience. From the early days, Schultz was really trying to make Starbucks

What he basically called ‘the third place,’ which is somewhere outside of your work or your home, where you can just hang out. The idea took off. Today, Starbucks is the second largest restaurant chain in the world, behind only McDonald's, with over 40,000 locations worldwide.

What Starbucks did very well was essentially decommoditizing a commodity. Coffee is a commodity. They made it an aspirational beverage, and they sold this idea that you could have this everyday luxury. Decades later, Starbucks has evolved into a ubiquitous brand,

one that's now more everyday than luxury. And the cafe experience has changed too. Customers today purchase more iced coffees and complex concoctions like Frappuccinos and Lemonade Refreshers than they do hot coffees. Can I get a grande Dragon Fruit Refresher?

blended with strawberry puree, and then could you add— Give me one second, sorry. Sorry, it's kind of a complicated one. Starbucks is a brand that was born serving hot beverages. The preponderance of what they serve in the US now is cold.

So it's a little bit like building, I don't know, a Cadillac in a Buick factory. The Starbucks business changed a lot during the pandemic. And one of the things that surged was mobile ordering. So on the app, people find it a lot easier to make their drinks more complicated.

For baristas, the combination of more to-go orders, more cold drinks, and more customization proved to be really stressful. And a lot of them felt that they weren't really set up for success, and they were burning out pretty quickly. All of this added fuel to a unionization movement.

That started in Buffalo, New York, in 2021. Employees at Starbucks in Buffalo made history today, becoming the first baristas in the company to vote in favor of joining a union. One of the really interesting aspects of the Starbucks unionization drive

is that it sort of challenged this perception of Starbucks as a really good employer. I'm Gio Garza. I am a barista in the Chicagoland area, and our store recently unionized on September 27, 2024.

My store has been having a lot of issues with short staffing, especially during the nighttime hours. We haven't been able to get a lot of the tasks that we need to get done. Sometimes when we're super stressed, we don't really have the time

to create that connection with the customer, and it's not that we don't want to. We really do. We love our customers. But when we're always dealing with understaffing or things breaking, then we're not able to create that connection.

In the midst of the unionization push, Howard Schultz, who'd stepped down as CEO in 2017, returned to the company. Schultz took the unionization effort personally and as an affront to this image of a worker-friendly brand that he had built.

Over the next year, the company closed several stores that had unionized. By March 2023, when Schultz appeared in front of a Senate committee, workers felt the company was stonewalling at the bargaining table. Over the past 18 months,

Starbucks has waged the most aggressive and illegal union-busting campaign in the modern history of our country. Sir, Starbucks Coffee Company, unequivocally, and let me set the tone for this very early on, has not broken the law.

Okay. By then, Schultz had turned over control of the company to Laxman Narasimhan, a former Pepsi executive. The two parties were sort of locked in an impasse for a while over the contract, so there is no contract just yet.

But earlier this year, they actually reopened those lines of communication. I think that we are pushing forward for a really good chance that we will have a contract that we are both satisfied with. I am also super excited and happy that I'm able to join

the union with 10,500-plus workers. So it's really empowering for us. Starbucks' woes haven't disappeared. The company's bottom line took a hit when dueling boycotts erupted over the war in Gaza after the union shared social media posts expressing solidarity with Palestinians.

The company says it's never taken an official position on the war. Meanwhile, China, one of Starbucks' biggest regions for growth, has become another trouble spot. The pandemic hit the Chinese market particularly hard, and recently, Starbucks lost

the mantle of the country's largest coffee retailer to Luckin Coffee, which automates a lot of the work, which allows it to save money and basically charge customers less. China has been quite volatile during the pandemic and post-pandemic. And what we've seen this year has been very similar.

To what some other brands have seen, which is that the more casual consumer, the non-rewards consumer, has been tougher to get back in as frequently. In August, the company announced it was going with yet another new CEO, its third in three years.

Brian Niccol has had a lot of experience in the restaurant industry: Pizza Hut, Taco Bell, Yum! Brands, and then Chipotle. Starbucks is a different animal. Niccol is an experienced restaurant executive. He led Chipotle starting in 2018 when the company was reeling

from a lot of issues. One of the big ones was a contamination issue that had actually sickened a bunch of people. But he managed to turn the brand around. The Starbucks board hired Brian Niccol at this inflection point for the company

where they're really trying to figure out if they're going to be this to-go machine, or if they're going to go back to being the neighborhood coffeehouse. I think, as you know, last month I made a commitment that we would get back to Starbucks.

That means focusing on what has always set Starbucks apart: a welcoming coffeehouse where people gather and where we serve the finest coffee handcrafted by our skilled baristas. But the company's latest sales results showed just how far it still has to go.

If you look at what Brian did with Chipotle, very, very good storytelling about real food that generally resonated very well, obviously with consumers, given Chipotle's sales trends subsequently. So that's the hope, is that Brian can turn this around.

Although, obviously, it will probably take some time.

Can Starbucks Save Itself?

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Bloomberg Originals

Starbucks' struggles: declining sales, overworked employees, and the need for a fresh start.

Declining sales and overworked employees are major issues facing Starbucks.

A walkout of over 1000 employees highlights employee dissatisfaction.

Sales are at their worst since the pandemic, comparable to recession levels.

Increased drink complexity and longer wait times contribute to customer dissatisfaction.

Starbucks' origins and early success: from commodity to aspirational beverage.

Howard Schultz's vision transformed coffee from fuel to a European-style experience.

Schultz aimed to create 'the third place,' a space outside of work or home.

Starbucks' success stemmed from decommoditizing coffee, making it an aspirational beverage.

Starbucks evolved into a ubiquitous brand, shifting from luxury to everyday.

Challenges of the modern Starbucks: cold drinks, customization, and employee burnout.

Increased demand for iced coffees and complex drinks changed the cafe experience.

The shift towards cold beverages presents operational challenges.

Mobile ordering increased drink complexity, adding stress for baristas.

Increased workload and stress fueled a unionization movement.

Unionization efforts and Starbucks' response.

Unionization challenged Starbucks' image as a good employer.

A barista shares experiences of short staffing and its impact on customer service.

Howard Schultz's return and aggressive anti-union tactics.

Starbucks' union-busting campaign is described as aggressive and illegal.

New CEO Laxman Narasimhan reopened communication with the union.

Further challenges: boycotts, China market struggles, and CEO changes.

Dueling boycotts impacted Starbucks' bottom line.

China market struggles and loss of market share to Luckin Coffee.

Appointment of Brian Niccol as the third CEO in three years.

Brian Niccol's appointment and future prospects.

Niccol's experience in turning around struggling restaurant brands.

Starbucks' strategic direction: to-go machine or neighborhood coffeehouse?

Commitment to returning to Starbucks' roots: welcoming coffeehouse with handcrafted coffee.

Hope for a turnaround based on Niccol's success with Chipotle.

Can Starbucks Save Itself?

Can Starbucks Save Itself?

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