Transcript
How Starbucks’ CEO is revamping the brand
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1:20 Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. The phone we're in is we gotta get things turned around. We gotta get what I would call the soul of the business back. And this connection back.
1:41 We are having to reintroduce the brand. To people. We gotta change the conversation of what the Starbucks coffee company stands for. You know, if if people just call us a corporation, I'm not doing my job. And You know, I we're gonna use marketing to do that, and we're gonna use experiences in the store to do that.
2:10 That'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.
2:39 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. It's a full cup, so let's get to it. I'm Bob Saphian, and this Із рапід респас.
3:06 I'm Bob Safe and I'm here with Brian Nickel, 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
3:21 A slew of changes from the menu to the Bathroom policy. You just announced quarterly earnings this week. You've been you've been very busy. Do you do you rely on extra coffee to keep up the pace, or is it natural adrenaline? Uh my caffeine intake has definitely gone up since uh I took this job, but I love the energy. Of the turnaround and uh you know, look, the coffee's pretty darn good too.
3:44 So you've called the your strategy back to Starbucks, and it's included the return of a condiment station, the return of handwritten names on cops. It can sound like a lot of small details. Is that all that's required? Tuning the details. Yeah, look, I I mean We are in the retail business. We're in the customer service business and
4:08 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.
4:28 Is the moment. that potentially you have in our store. Uh the community of the store, the moment you might have with Arbarista. Or just the moment where you grab your cup and unexpectedly You know, there's a little smiley face on your cup.
4:42 And it just changes The entire attitude uh the customer and uh You know obviously gotta have a great product, you gotta have a great experience. But if you have those little moments of connection
4:54 It just adds so much more. Yeah, well it it's always interesting how in you know food related businesses like of course uh the product has to be satisfying, but so much of it is about the experience, about getting the experience to feel memorable. Satisfying.
5:09 Yeah, that's right. And you know, look, I think one of the things that veered Starbucks a little bit off. was the whole Mobile ordering, uh the Covid situation. I think it just really took a lot of the soul out of
5:24 what this business is all about. And You know I I'm sure Bob like Like me I remember when the first Starbucks kinda came to my neighborhood and It was a moment for our neighborhood, right? I was in living in Cincinnati, Ohio
5:37 Uh I was working at Procter Gamble at the time. And we were like, Hey, 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 Um
5:51 I think just what happened with Mobile ordering. It kinda chipped away at A little bit. of that soul and that connection because we went
6:00 to labels and we stopped writing on the cups and 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.
6:15 There is this kind of um impression that there was like And and earlier Starbucks heyday, but it's not like the stock is that far from its all time high. So like it when you think of the sort of the life cycle of the company, it what phase do you feel like it's in, or like do you see phases ahead? Yeah, look, I I think w right now the phone is we gotta get things turned around, at least in a US business. We gotta get what I would call the soul of the business back. and this connection back and the the partner experience back so that the customer feels
6:49 the brand again. Okay. 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.
7:03 I think people want to get out of the loneliness phase and get back to the connection phase. And I I've had the opportunity to travel around the world and it's true everywhere I've been, you know, whether it was Italy Which was also a little bit surreal because You know, the whole Starbucks original idea came from Howard visiting Italy and 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
7:28 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 the founder and multiple time CEO there. Do you talk with him about what you're doing or is it kind of you're you're on your own? Howard's been great. You know, I I think
7:47 I'm fortunate that You still have a founder. that can share the history of how Starbucks went from You know The one store
7:56 in Seattle to the iconic global brand that it is. You 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. Uh but he's he's available for me to say I'm just curious, why did we do this? You know, mm. 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
8:19 Yeah, it 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 and resolving them and sort of making them work the way maybe the way they used to, sh shorter wait times, more welcoming in store environments. One of the big pain points that is kind of tough, like rising prices. You you don't control inflation. Proposed tariffs would hit coffee imports. Are there things that
8:44 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.
9:04 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. With that said, I I do believe one of our key objectives here.
9:19 is to create a brand that's so valuable that we have growth that can help offset some of this challenge. Two. Yeah. businesses get in trouble and I think Starbucks might have gotten a little bit of this trouble is
9:30 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 gotta pull back in those areas and make sure that we are only really focused on
9:47 cost reduction in those places that don't add value to the proposition. Mm. During Starbucks' life there's been a an increasing proliferation of Neighborhood coffee houses. How much do you think about like these hyper local cafes as your competition. I was watching your your new commercial That's not my name. And it ends with it 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?
10:15 The reality is Starbucks started out as a coffee company. And at the heart, that's what we are. Like again, I I went back and did a little history Uh lesson. And when Starbucks first started, it had a very simple statement to be the purveyor of the finest coffee in the world.
10:33 And 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 it what I want people to understand is we are so committed to the coffee quality.
10:44 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,'cause I think we we we've forgotten to tell people that over the last, you know
11:03 L'ast decade. I mean it sounds like It 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 gonna continue to be an innovative company.
11:24 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.
11:37 And My point is like let's have a strong, healthy core and then we can innovate from there. How how much of this is an echo of you know you applying the lessons that you apply to Chipotle Or Or is every retail brand different and like you you can't necessarily translate across quite that way?
11:57 I started my career at Procter Gamble and one of the things that was uh kind of a 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 uh managers early on said, Hey, look, when you shift brands One of the first things you gotta find out is why do people love That brand.
12:16 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. Once you kinda understand what makes your brand special and how you, you know, are able to get the right economics for what you're providing.
12:31 that's what you gotta hold on to. And I've taken that approach to all the businesses that I've Have the you know, good fortune to be a a part of or had the opportunity to lead. I was set up at a place in Chipotle where
12:44 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. I've gonna do it in a little different way.
13:00 This is you know Coffee and the romance of coffee. Which has got a little bit of a I think different appeal uh than what I was doing before. The Starbucks role 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 how different is that kind of thing than than what you saw at at Chipotle?
13:24 It's wildly different. I I you know I Probably under Estimated How much people would be interested in what I'm up to.
13:33 Uh 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. A lot of people use the brand. And so therefore they You know, have an opinion on what's going on and I I I was definitely surprised by
13:50 how much coverage and all the different stories that pop up. But uh at the end of the day. You know what? Um I prefer people caring than not caring. So um And you're not gonna move the headquarters to Southern California?
14:04 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 okay. And you can tell why the Chipotle team responded to him and why, at least so far, Starbucks seems to be showing new energy. Некста Брайан шерс зі план форма Starbucks the best job in retail. Plus he unpacks his unsolved problems with mobile ordering and more.
14:33 Stay with us. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show. Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford's CEO to NAS administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there.
15:15 Humans will never be more intelligent than AI. There can be two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered.
15:30 I'm Rana El Calyubi. On my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Before the break, Starbucks CEO Brian Nickel explained his back to Starbucks strategy for recapturing brand magic. Now Brian talks about Starbucks' biggest challenges ahead, from competition in China to workforce disaffection in the US to the conundrum of mobile ordering.
16:17 Plus how Starbucks is deploying AI across the business. Let's jump back in. China'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 i is that a fight you still wanna win?
16:44 Yeah, no, look the the whole back to Starbucks strategy is more about a re grounding of the brand. Globally. I 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.
16:59 In Both menu Pricing architecture. Uh product and food innovation. But the fundamentals of
17:07 Look. A moment of connection. A great third place. A barista that's engaged and demonstrates caring. applies.
17:16 Frankly. I think there're some things the US business can learn from what we're doing. in these other markets. Uh, some of these places are ahead of The US business on being
17:26 What Starbucks should be. Yeah, I I was curious whether y you saw a similar kind of disconnecting in those global stores that you saw. and and have seen in the US or whether it it didn't quite Drift as much there. Mobile ordering is just not nearly as
17:44 Prevalent in the business. Um as I've seen in the US, with the exception China's got a pretty developed digital business. But like in Italy Japan.
17:55 Korea not as much. Although it's developing, but they've done a nice job of keeping the channels separated so that they aren't competing and creating a conflict. Unlike in the US, we really didn't do a great job of Keeping those businesses orderly and separated. Yeah, it's it's uh technology is a great
18:13 tool and helps make things easier for employees and customers. But it Doesn't always make things less complicated. Yeah, well said. I might I might have a job available for you. Uh Starbucks has seen a bunch of unionizing in the US in recent years, 10,000 some employees. How focused are you on addressing pain points for the Starbucks team versus the customers?
18:41 I wanna have the best job in retail. And I believe we have the best job in retail. And when you look at Uh the career opportunity. It's the best job in retail. When you look at The wage
18:53 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
19:02 You know, we've made great progress on scheduling and uh I think we're gonna make even better progress on developing people so they can develop their careers with us. I most recently just introduced a desire to have ninety percent promote within. I also discovered I think it's like sixty five percent of our store managers are women. And they're kind of in their thirties.
19:24 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.
19:34 And you know what, they were right. We 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 I am Passionate about the idea of
19:48 Setting our partners up for success. Putting him in the best job in retail. And I think, you know, look, we're starting to see progress. Our turnovers I think the lowest in the industry. Down to fifty some odd percent.
20:00 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 uh Danny Meyer, the restaurateur and co founder of Shake Shack about how hard it is for em employees to build a career in retail and hospitality, you know, except at the very top of the companies. And Right, even as you're saying like oh it's great that turnover is only fifty percent, but fifty percent turnover is still replacing a bringing a lot of new people through all the time. Yeah, but I mean look relative to the industry
20:32 I think the industry is over a hundred. Last 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
20:46 facing customer Rolls. where you join us as a green apron partner. We I think we're providing great opportunities. for those individuals.
20:57 What I'd love to have happen is how do we move'em 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 gonna need the The people. So I'd rather
21:12 The growth happened 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 have you taken time yet to experience the barista lifestyle? I have. I'm definitely not gonna win the Barista championship uh by any means But uh I definitely
21:32 understand what the job is. Are there specific things that you learned from going through that experience? 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.
21:47 And 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 gotta kinda guess at cream and sugar for Our guests. I was like, Oh, okay.
21:59 And Or a customer was kind of one of those deals where they're like, Why's my Brewed cup of coffee. Going down the line, why don't you just hand it to me? I wanna go put in my own cream and sugar. And so this is one of those classic hangovers from Covid where we just never
22:13 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. A lot of uh CEOs come out of finance or out of sales. You come from a marketing centric background. And I 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 the
22:40 The issue of opening I mean that was something that was kind of interpreted or explained through the lens of values? Was w was it not? I I think it's like, hey, we gotta be practical. You know, and what was practical is this is another great example where I was you know spending some time in the stores with our partners and I'm like
23:00 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
23:12 Are 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
23:26 Cafe. But meanwhile, right across the street is a coffee house with furniture And having a great experience. We're gonna use I think practical practices to ensure we have a great
23:38 Safe space for customers. Partners and That's what we stand for. I realized that I I I have gone through this long and I haven't asked you yet about AI, which is like a record. 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.
23:59 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.
24:17 As well as maintenance as it relates to keeping our equipment up and running and ready to go, right? We can start to implement these things so it knows that the maestra is gonna have a problem. The maestrain is our espresso machine. If the espresso machine goes down, we're out of business. Versus I'd rather have kinda 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
24:40 The user experience as it relates to the app. It's also a great resource potentially for training. And uh helping people navigate unexpected events, right? Like Make it up.
24:51 You're supposed to have nine people, but only eight people show up today. What's the best way to deploy now? It's really a co pilot, if you will. This is how I see us using it. But not particularly customer facing that. engagement you want to keep human.
25:04 Correct. Yeah, correct. When you come in. as an outsider to a company where you haven't worked before And y you have to
25:13 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, uh the experience I've taken is be more of a listener initially. And then You know what?
25:32 Be transparent on your decisions. And that has served me well. And then also make sure you're bringing people along with you on those decisions. Right. So Give'em. The why
25:43 As much as what you would like to do. And uh What I have found is if you're Committed to listening and learning. And then you use that as a way to inform the decisions that you make.
25:56 And people understand where the decisions are coming from. Uh, you know, you can bring along people you're not gonna you're gonna be able to convince everybody. And you know, I've just had to accept That's how this works. But I think I can bring along Uh The people that want
26:10 to be all in. And You know, the the other places that ultimately don't believe in you or don't believe in what's going on. Yeah, usually they find their way to another uh opportunity.
26:20 You make it all sound so logical and Simple. I mean all of the changes that you're making, you know, it sounds like it simple, straightforward. Mm-hmm. What's been hard about it or or is it been pretty straightforward for you because you knew
26:35 What you wanted to address. Look, I I do believe in organizations of this size and our scale, you gotta keep it simple so that People Can repeat it. Buy into it.
26:48 And then uh Teach it. Right. It's like I see people teaching how we're gonna clean up The mob ordering.
26:56 bottleneck that we have, right? Make no mistake, these aren't easy things. To solve specifically the mobile ordering conundrum that we have where it's all first in, first out. But the thing that I love is we've simplified the problem we're trying to solve. And the problem we're trying to solve is
27:11 We have to bring order to mobile order. So that we can have a great cafe experience. And a great drive thru experience. How we're gonna do that? We're gonna deliver a four minute experience in in the cafe. And we're gonna make sure that we don't get past
27:25 You know, twelve to fifteen minutes immobile order because we know that's when people abandon. Now how you actually pull that off? Not as simple as what I just said. But but Knowing what the objective is is I think ninety nine percent of the battle. And the fact that you're not sure exactly what the answer is yet.
27:43 It's not necessarily up to you to solve the problem. It's To create an environment where others are Attacking the problem. Yeah, that's exactly right. Like I I'm not gonna be able to one to solve how we get to the four minutes bringing order to mobile order.
27:59 But what I can share with people is like This is why This is the right thing to do for the business. And this is why we will be successful if we can capture that outcome. And I guess the the hard things that will come to you, maybe, are like the trade offs that may be required to be able to reach that, right? Yeah, that's right. It's like, hey, you may need to discontinue some items. We may need to
28:20 In some cases you know, change the way people order digitally. Like now you may have to pick what time you want your beverage as opposed to Right now it is you order and we spit back. Hey, that beverage will be ready in three to five minutes. We may have to flip that where it's like
28:35 You select, hey, I'll pick up my coffee at eight AM. There's a window that you pick where you get it. That's right. You you would be like, I'll get my coffee between eight and eight oh five. Great. Now we can cue that into the system. And we can take care of our in store customers. We know how many uh mobile orders and how many we can allow into that five minute slot. It's like a new choreography for the store.
28:57 I think if we can reliably deliver for people Roughly a four minute experience in store. Then you will reliably come to the store. The challenge we have right now is you don't know what you're gonna get when you come into our store, partly because we have no control over how many mobile orders are coming in when And how many?
29:16 And so That really can Really in a bottleneck situation that creates a lot of pressure
29:24 on our partners to try and just get drinks out the door as opposed to Creating drinks with connections. And if that means that I uh as a mobile order, I have to wait a little longer, like I can't just know that I can get it Whenever I want in the next three to five minutes. That just may be a trade off that has to happen.
29:42 That might be the trade off that has to happen. That's exactly right. And look, one of the things I know is on average our drinks are sitting on the counter six to eight minutes already. So it's like I'm providing you drinks in Three to four minutes.
29:54 And people aren't showing up for another Four minutes. That's just waste. That's just waste. And also You end up with not the best product either. Because it's been sitting there.
30:05 Yeah. It's been sitting there. And then usually what happens you ask our baris to remake it. And I'm like, oh it you know, it it's just a vicious kind of circle. So Um But you you hit the nail on the head. That's exactly right. Mm.
30:18 Given all this, like what do you feel like is at stake for Starbucks right now? Yeah, look, I I think uh the whole Kind of. integrity or soul of Starbucks is at stake if I can't get mobile ordering to balance with the in-store experience.
30:35 We are having to reintroduce the brand. Uh to people. You know, it's I don't know if you've seen the most recent ads that we've put out there, but It's this whole idea of like hello again.
30:46 uh let us reintroduce you to the Starbucks business and what the Starbucks coffee company is all about. And uh you're gonna see us continue to do that. And uh We gotta train change the conversation of what the Starbucks coffee company stands for. You know, if if people just call us a corporation, I'm not doing my job. And Yeah. I we're gonna use marketing to do that and we're gonna use experiences in the store to do that.
31:09 Hm. Well, Brian, this has been great. Thanks so much for doing it, for taking the time. I really appreciate it. Yeah, likewise. Great meeting you and uh great great spending some time talking with you. I've never talked to Brian before this, and I have to say I liked him. His confidence, calmness, and clarity of direction feels like a good fit for Starbucks' needs. I keep returning to his focus on the details rather than on grand sweeping statements, and it's a great reminder that excellence and success is at the end of the day in the details.
31:42 That doesn't mean Brian doesn't have grand aspirations for Starbucks, but every business needs a solid foundation to grow from. He seems to acknowledge that for Starbucks, that foundation is more about the experience and the brand. Then it is about the coffee, even as he talks up the Starbucks Caffe Company. It's a deaf dance, looking up ahead at the horizon while also keeping a close eye on what's directly beneath your feet. But that's what leadership requires in a world where so much changes so fast.
32:14 We all have to remind ourselves where the solid ground is for us. And then build from there. I'm Bob Safian. Thanks for listening. Rapid response is a wait what original.
32:32 I'm Bob Safian. Our executive producer is Eve Tro. Our producer is Alex Morris. Assistant producer is Masha Maku Tonina. Mixing and Mastering by Aaron Bastanelli. Theme music by Ryan Holiday. Our head of podcasts is Letal Malad. For more, visit rapidresponsshow.com.
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