Starbucks slashes jobs, scales back ‘complex’ menu
Struggling American coffee giant Starbucks is slashing jobs and cutting back its “complex” drinks menu as it battles falling sales.
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US coffee giant Starbucks is cutting more than 1000 jobs as part of a reorganisation as it aims to reignite sales growth, the company’s new chief executive says.
Starbucks is taking “the hard decision to eliminate 1100 current support partner roles and several hundred additional open and unfilled positions”, Brian Niccol said in a message to employees on Monday.
The move will not affect frontline baristas.
As of September 2024, the Seattle-based company employed 361,000 workers globally, including 16,000 in administrative and support positions.
Mr Niccol joined Starbucks in September 2024 as part of a leadership shake-up as the chain contends with sagging sales.
In the most recent quarter, Starbucks reported a drop in profits following a 4 per cent decline in global comparable store sales.
In a January 28 earnings conference call, Mr Niccol touted various pilot program tests to reinvigorate the chain by speeding customer service and restoring more personal touches, such as notes from coffee baristas to customers.
“We are simplifying our structure, removing layers and duplication and creating smaller, more nimble teams,” Mr Niccol said in Monday’s message.
“Our intent is to operate more efficiently, increase accountability, reduce complexity and drive better integration.”
Starbucks also plans to scale back its offerings.
The company is removing “a selection of less popular beverages from our menu, such as some frappuccino-blended drinks that “aren’t commonly purchased, can be complex to make, or are like other beverages on our menu”, according to the company’s website.
Starbucks Australia has been contacted for additional comment.
The local arm of the business is owned and operated under licence by the billionaire Withers family, the former owners of 7-Eleven Australia.
The American chain first entered the Australian market in 2000 and expanded to nearly 90 locations by 2008, before closing more than 70 per cent of its stores that year due to poor sales.
The Withers family bought Starbucks’ local business in 2014 but it did not turn a profit until 2023 — after 23 years in Australia and more than $140 million in losses.
But the slim $3.15 million profit, boosted by Gen Zs buying pricier cold drinks like iced coffees and frappuccinos, dipped again to a $5.83 million loss in 2024.
Marketing expert Professor Gary Mortimer from the Queensland University of Technology said Starbucks Australia was “not alone in the challenges facing cafes today”, with the “double whammy” of rising input costs and lower discretionary spending leaving many “stuck”.
“Commodity prices for coffee have doubled in the last 12 months from about $US2 a pound to over $US4,” he said.
“If your key input has doubled in price [you face the tough question] of, ‘Do I push prices to $7, $8 a cup?’ With the cost-of-living crisis, people [are already] forgoing that cup of coffee that is at that $6 or $7 price point. Cafes are stuck. Do I push the price up and displace further customers or hold the price down and achieve lower margins?”
Prof Mortimer added broader changes in consumer behaviour were also hurting cafes.
“Everyone I know has a coffee machine in their kitchen now,” he said.
“Whether it’s pods or a better-quality machine, most of us are getting up and having a morning coffee at home. That removes the need for a coffee on the way to work.”
In its financial report lodged with the corporate regulator in October, Starbucks Australia said the “challenges of accelerated growth through tougher economic times results in swings in profitability”.
“In November 2023 there was an industry-wide decline in customer traffic, despite this the company has continued to expand store numbers and increase the digital capability and convenience in how our customers engage with the brand,” it said.
“This was through our expansion of the Starbucks mobile order and pay app and a further seven drive-through locations opened during the year.”
Revenue increased 8.7 per cent to $169.4 million, but this was offset by 16 per cent rises in inventory and staffing expenses.
Starbucks said it would continue to focus on network expansion, “continued growth in brand awareness and operational efficiencies”.
“The future pipeline of stores to open is strong, including entering into a brand-new market in the next financial year,” it said.
Starbucks had 70 Australian stores as of June 30, 2024, a net increase of three locations over the year with seven openings and four closures.
— with AFP
Originally published as Starbucks slashes jobs, scales back ‘complex’ menu
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