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Starbucks will spend another $450 million overhauling its coffee machines and stores as it tries to accelerate growth, catch up with changing consumer tastes and mend relations with troubled baristas.
The company had “lost its way” in recent years, said Howard Schultz, the founder who returned as interim CEO in April. But, he predicted, “the best days of Starbucks are ahead of us”.
Schultz said Starbucks would rise faster than it had after a previous crisis in 2008. He told an investor meeting in Seattle on Tuesday that the company would deliver double-digit revenue growth over the long term, at the upper end of previous projections, with a similar expansion excess.
The “reinvention” plan will include $450mn of new investment in its North American stores next year, on top of 2022’s $1bn investment programme.
Chief financial officer Rachel Ruggeri hailed “a new era of growth” and said Starbucks’ earnings could grow 15-20 percent annually over the next three years, compared with the 10-12 percent it had previously guided.
Starbucks also unveiled new equipment that cuts the time it takes to heat food and create the increasingly complex cold drinks that now account for 70 percent of coffee sales.
The new machines are needed to handle booming demand at its US stores and address the frustrations of increasingly complex orders that have exacerbated employee concerns about pay and conditions.
Starbucks Workers United, a group of baristas that has organized more than 200 stores across the United States, protested outside Starbucks headquarters against what it called the company’s “aggressive union-busting campaign.” Two Seattle stores went on strike for the day.
The National Labor Relations Board has accused Starbucks of violating labor laws by withholding wage increases and new benefits from stores that have voted to unionize. The company has said it cannot extend such benefits without “good faith collective bargaining.”
John Culver, Starbucks’ outgoing chief operating officer, told investors they would “continue to negotiate in good faith”.
But Culver said he saw two paths for the company and its people. “We can work together as partners, side by side, or we can have a third party between us,” he said. “By working side by side, we can effectively deliver solutions that support partners in their jobs as well as in their lives.”
Despite the union movement’s successes, chief strategy officer Frank Britt said Starbucks’ employee turnover had fallen from a peak in 2021 of about 22 percent above 2019’s level to just 97 percent of the pre-coronavirus pandemic rate.
Starbucks executives said the company would increase its revenue in North America by about 40 percent and would more than double profits outside the domestic market on a corresponding increase in sales.
China’s zero-Covid policy has forced many Starbucks stores to close across its second-largest market, but the company said it saw “enormous potential” in a country where the average consumer drinks just 12 cups of coffee a year, compared with 380 in OS.
“China’s coffee market is entering a new era of growth,” said Belinda Wong, president of Starbucks China. It will open a store every nine hours in the next three years to expand from 6,000 stores to 9,000 by 2025.
Earlier this month, Starbucks named Laxman Narasimhan, the former chief executive of Reckitt Benckiser, as its incoming CEO, saying he would work with Schultz before succeeding him in April.
On stage in Seattle, Narasimhan said he saw “limitless” possibilities for the brand. Schultz greeted him by handing over a gold coffee bean he had been given by a Guatemalan coffee farmer, which sat on his desk for about 40 years.
Boosted by higher same-store sales and plans to open eight new stores a day, revenue growth will hit 10-12 percent a year, 2 percentage points higher than previously expected.
Ruggeri, the chief financial officer, also announced plans to resume share buybacks, which Schultz suspended in April to fund investments in the company’s operations, in fiscal 2024. Including dividends, Starbucks would return about $20 billion to shareholders over the next three years, she said .
Starbucks shares, down 25 percent this year, were up 2.5 percent in after-hours trading.
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