Starbucks CEO Brian Niccol refocuses the company on its core business as he starts first week

Starbucks’ (SBUX) new CEO, Brian Niccol, is brewing up a new chapter for the coffee chain as it focuses on its origins.

In an open letter, Niccol said he’s been spending time in stores and with employees since he was announced as the next CEO on Aug. 13, 2024. The coffee giant is “beloved” but has “drifted” from its core, he said, as he officially started his role this week.

In the US, he acknowledged, “we aren’t always delivering. It can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic.”

Last quarter, same-store sales declined 2% in the US.

The former Chipotle (CMG) CEO now plans to home in on four key areas. First is empowering baristas to ensure they “have the tools and time” to make great drinks. Second, provide “career opportunities and a clear path to growth.” Third, ensure customers’ orders are delivered on time and elevate the in-store experience with a “clear distinction between “to-go” and “for-here.” And finally, the company will focus on telling its story. “We won’t let others define who we are,” Niccol wrote.

China, Starbucks’ second-largest market, has been its worst-performing segment. In the third quarter, same-store sales fell 14% year over year. Niccol wrote that the team needs “to understand the potential path to capture growth and capitalize on our strengths in this dynamic market.”

During Starbucks’ last earnings call, former CEO Laxman Narasimhan said the team is in the “very early stages” of exploring joint ventures and strategic partnerships in technology, real estate, and the supply chain.

Niccol said while he’ll initially be focusing on the US, Starbucks is looking globally for growth, including in the Middle East, where the company will “work to dispel misconceptions about our brand.”

Niccol’s strength in turnarounds is partially why he got the top spot. He led Chipotle’s comeback from its E. coli outbreak crisis and formerly excelled at marketing at Yum! Brands’ (YUM) Taco Bell.

“We see similarities between Chipotle’s 2018 turnaround for a premium brand, and what Starbucks needs in 2024 to improve traffic,” Andrew Charles of TD Cowen wrote in a note to clients.

Deutsche Bank analyst Lauren Silberman told Yahoo Finance that Starbucks’ current state of affairs kicked off last October when boycotts around the brand were a “catalyst for challenges.”

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Since then, “it’s been consistent, … 10% to 12% of people say … [they] aren’t going to Starbucks anymore,” she said.

Other challenges for the brand include value and innovation.

“I disagree that there’s a price issue. Starbucks has always been expensive,” she said. “What has changed, in my opinion, is the value perception, which encapsulates your experience, your feelings about the brand itself. “

Starbucks also needs to double down on its innovation cadence and market it successfully.

“Do I think these new products were successful? No,” Silberman said. “Do I think the products were good? Yes.”

Over the past couple of months, activist investors Elliott Investment Management and Starboard Value have also taken stakes in the company, adding more pressure for a turnaround.

Niccol will have to bring Chipotle’s efficiency to Starbucks. The fast-casual chain boasted 8% transaction growth in its latest quarter and is known for its throughput, or the speed a restaurant moves people through its store.

Silberman added that she believes Niccol is the exact fit to remind people “why they love Starbucks” and make it culturally relevant like he made Chipotle.

“He’ll be exceptional at figuring that out and that’s something Starbucks has not been able to figure out,” she said.

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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