Starbucks CEO vows changes as global demand in coffee chain drops

Weak sales in US and China drag on Seattle-based coffee chain in fourth quarter

A customer leaves a Starbucks in Buffalo, New York, in December 2021. Reuters

New Starbucks chief executive Brian Niccol vowed to implement changes to the company, as struggling sales in its two biggest markets dragged on global sales this year.

Global comparable sales fell 7 per cent for the fourth quarter despite a 2 per cent increase in the average ticket, Starbucks reported after trading closed on Wednesday. It released its preliminary report last week and announced it was pushing back its 2025 outlook.

“Our financial results were very disappointing, and it is clear we need to fundamentally change our strategy to win back customers and return to growth,” Mr Niccol said during an earnings call.

Weighing the heaviest on Starbucks are dips in its two largest markets: the US and China. Stores in the US and China represent 61 per cent of Starbucks' global portfolio, with nearly 17,000 American shops.

The company faces a growing list of problems including pricey drinks for cost-conscious customers, complex drink orders, long waiting times and skeleton crews at its locations. Comparable sales in North America and the US dropped 6 per cent.

As part of its broader plans to simplify its menu, Starbucks on Tuesday announced it is eliminating its olive oil-infused beverages, less than a year after they made their debut.

Mr Niccol also said Starbucks will stop charging extra for dairy substitutions in its drinks in North American cafes beginning this holiday period.

Starbucks is also facing increased competition in China, where comparable sales fell 14 per cent in the fourth quarter.

For the full fiscal year, same store sales declined 2 per cent. International and China comparable store sales declined 4 per cent and 8 per cent, respectively.

Mr Niccol said the company is in the process of implementing four changes to its strategy, including decluttering its menu. He said the company is looking to bring back the “third place” experience after a massive shift to drive-through ordering, increasing staff and streamlining mobile ordering, while bringing back its coffee condiment bar.

He acknowledged that the company has focused too heavily on its rewards customers.

“Everything I have seen and heard tells me we have significant strengths to build on,” Mr Niccol said during an earnings call.

Starbucks lured him from Chipotle this year in an effort to reverse its declining sales.