How Starbucks’ CEO is revamping the brand

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1:17The 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. And, you know, we're going to use marketing to do that. And we're going to use experiences in the store to do that.

1:54That's Brian Nickel, the CEO of Starbucks. Before taking the helm in September, Brian was CEO of Chipotle, doubling revenue and taking the fast, casual brand to new heights. At Starbucks, Brian's taking on a business in a reputational decline, with sales waning and customers dissatisfied by long wait times and high prices. Brian is pushing a so-called back-to-Starbucks plan, stripping the business to its core and prioritizing human connection. Brian shares insights for leaders everywhere about the power of small details and simple strategy. He also explains why mobile ordering is the business's biggest pain point, his solutions for union unrest, how AI is impacting operations, the potential impact of Trump's tariffs, and more.

2:42It's a full cup, so let's get to it. I'm Bob Safian, and this is Rapid Response.

2:53I'm Bob Safian. I'm here with Brian Nichols, CEO of Starbucks. Brian, thanks for joining us. Yeah, great to be here, Bob. So 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 look, the coffee's 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.

3:37It 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 our barista, or just the moment where you grab your cup and unexpectedly, there's a little smiley face on your cup.

4:25And 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. 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.

5:04I 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 & 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 Americana with an extra shot. And I'm like, yeah, all right, that's me, I'm in. So I think just what happened with mobile ordering is 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.

5:46And, 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? Yeah, look, I think right now the phase we're in is we got to get things turned around, at least in a U.S.

6:22business. 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, whether it was Italy, which was also a little bit surreal because the whole Starbucks original idea came from Howard visiting Italy.

7:03And 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.

7:43You know, he doesn't want to run the company. He doesn't want to be involved in the day to day. He 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.

8:18One 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?

8:58With 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. And 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.

9:35During Starbucks' life, there's been an increasing proliferation of neighborhood coffee houses. How much do you think about 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, a 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.

10:17and 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 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.

10:49I 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, let's have a strong, healthy core, and then we can innovate from there. How much of this is an echo of you applying the lessons that you apply to Chipotle?

11:33Or is every retail brand different and you can't necessarily translate across quite that way? I started my career at Procter & Gamble. And one of the things that was kind of 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?

12:09Once 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.

12:43This 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 roll 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 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.

13:25A lot of people use the brand, and so therefore they 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. Brian may not have fully expected the spotlight he's under, but he seems to be managing OK. And you can tell why the Chipotle team responded to him and why, at least so far, Starbucks seems to be showing new energy. Next up, Brian shares his plans for making Starbucks, quote, the best job in retail.

14:12Plus, he unpacks his unsolved problems with mobile ordering and more. Stay with us.

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15:23aws.amazon.com slash activate and start building. Expanding your business in the U.S. can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert plus Fortune 500 level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one. So if you're scaling, make it simple with Deal. Go to deel.com slash MOS and get up to three months free. Before the break, Starbucks CEO Brian Nickel explained his back to Starbucks strategy for recapturing brand magic.

16:16Now Brian talks about Starbucks' biggest challenges ahead, from competition in China to workforce disaffection in the U.S. to the conundrum of mobile ordering, plus how Starbucks is deploying AI across the business. Let's jump back in.

16:39China'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. They 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 carrying applies.

17:25Frankly, I think there are some things the U.S. business can learn from what we're doing in these other markets. Some of these places are ahead of the U.S. 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 U.S. 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 U.S., with the exception China's got a pretty developed digital business, but like in Italy, Japan, Korea, not as much, although it's developing.

18:07But they've done a nice job of keeping the channels separated so that they aren't competing and creating a conflict. Unlike in the U.S., we really didn't do a great job of keeping those businesses orderly and separated. Yeah, technology is a great tool and helps make things easier for employees and customers, but it doesn't always make things less complicated. Yeah, well said. I might have a job available for you.

18:38Starbucks has seen a bunch of unionizing in the U.S. in recent years, 10 ,000-some employees. How focused are you on addressing pain points for the Starbucks team versus the customers? I want to have the best job in retail. And I believe we have the best job in retail. And when you look at the career opportunity, it's the best job in retail. When you look at the wage, again, best job in retail, benefits, best job in retail. And even if you're a part-time partner, we surround you with the best benefits and wage again. And, you know, we've made great progress on scheduling, and I think we're going to make even better progress on developing people so they can develop their careers with us.

19:19I most recently just introduced a desire to have 90 % promote within. I also discovered I think it's like 65 % of our store managers are women, and they're kind of in their 30s. and, you know, one of the things that came back through some emails from folks was, hey, it'd be helpful if I could get longer parental leave. And I took a look at it and, you know, they were right. We needed to provide longer parental leave if we wanted to have these people be able to stay with us and grow with us. And so we just added that benefit. So, you know, I am passionate about the idea of setting our partners up for success, putting them in the best job in retail.

20:01And I think, you know, look, we're starting to see progress. Our turnover is, I think, the lowest in the industry, down to 50 some odd percent. And like I said, now our goal is not only to retain people, but promote people. I've had several conversations over the years with Danny Meyer, the restaurateur and co-founder of Shake Shack, about how hard it is for employees to build a career in retail and hospitality, except at the very top of the companies. Even as you're saying, oh, it's great that turnover is only 50%, but 50 % turnover is still bringing a lot of new people through all the time. Yeah, but I mean, look, relative to the industry, I think the industry is over 100.

20:44last time I looked. So, you know, we're making nice progress. And when you become like a store manager, that drops dramatically. A district manager drops even more. So to your point, as you move out of the, call it the everyday facing customer roles where you join us as a green apron partner, I think we're providing great opportunities for those individuals. What I'd love to have happen is how do we move them into the store manager role so that, you know, The next thing you know, they're contemplating being a district manager. And the good news is we've got the growth where we're going to need the people.

21:20So I'd rather the growth happen for our own people than having to go external. When you started Chipotle, if I remember this right, you trained on the burrito line, right? Do I remember that right? Have you taken time yet to experience the barista lifestyle? I have. I'm definitely not going to win the barista championship by any means. but I definitely understand what the job is. Are there specific things that you learned from going through that experience? That's where I first heard about the desire to bring back the condiment bar. I was talking to some of our partners and they were like, brewed coffee is a real pain.

21:56And I'm like, wait, say more about that. Like, I see the equipment, what's the issue? And they're like, well, you know, we got to kind of guess at cream and sugar for our guests. I was like, oh, okay. and our customer was kind of one of those deals where they're like, why is my brewed cup of coffee going down the line? Why don't you just hand it to me? I want to go put in my own cream and sugar. And so this is one of those classic hangovers from COVID where we just never went back and put it back in place because I think we lost focus on the customer experience. And in this case, we also lost focus on what makes the partner experience better.

22:32A lot of CEOs come out of finance or out of sales. You come from a marketing-centric background. And I know at Chipotle, you talked about how consumers increasingly care about the brands that align with their values. How important are values to the Starbucks brand and the issue of opening bathrooms up to people who aren't customers? I mean, that was something that was kind of interpreted or explained through the lens of values. Was it not? I think it's like, hey, we got to be practical. You know, and what was practical is this is another great example where I was spending some time in the stores with our partners.

23:09And I'm like, hey, why does your store not have any furniture? And they're like, well, we took out the furniture because, you know, frankly, we were letting everybody in here and they weren't respecting our customers, our other baristas. And frankly, they're abusing the space. This is first and foremost a place for our customers. The thing that kind of broke my heart in this was you hear partners saying, hey, I don't feel safe. I hate what is happening in my cafe. But meanwhile, right across the street is a coffee house with furniture and having a great experience. We're going to use, I think, practical practices to ensure we have a great, safe space for customers, partners.

23:50And that's what we stand for. I realize that I have gone through this long and I haven't asked you yet about AI, which is like a wrecker. It's like it's a necessary question these days. I know Starbucks is developing an AI philosophy. Can you share what you're doing, how we might see AI applied? Yeah, look, a lot of it is behind the scenes to help us with like forecasting. These large language models really present an interesting opportunity for us as it relates to especially the sequencing of orders and mobile ordering. And then also how we deploy and execute in the stores, as well as maintenance as it relates to keeping our equipment up and running and ready to go.

24:30right? We can start to implement these things so it knows that the Mastrain is going to have a problem. The Mastrain is our espresso machine. If the espresso machine goes down, we're out of business versus I'd rather have kind of leading indicators that tell us, hey, this is getting wobbly. You might want to jump in and fix it. That's how we're starting to use it. It also has nice implications for like the user experience as it relates to the app. It's also a great resource potentially for training and helping people navigate unexpected events, right? Like make it you're supposed to have nine people, but only eight people show up today.

25:03What's the best way to deploy now? It's really a co-pilot, if you will, is how I see us using it. But not particularly customer-facing. That engagement, you want to keep human. Correct. Yeah, correct. When you come in as an outsider to a company where you haven't worked before, and you have to, I don't know, demonstrate your leadership, how do you make those connections across the organization? I know you said you've done some travel, but like what is meaningful? What things you feel like have worked? Have you tried any things that haven't worked? Yeah, look, the experience I've taken is be more of a listener initially.