New Starbucks CEO Wants Efficiency and Optimization

One of his first changes is charging $1 for a popular menu hack that is currently free of charge.

May 15, 2023

ALEXANDRIA, Va.—Starbucks CEO Laxman Narasimhan is leading Starbucks with a focus on efficiency and optimization, reports Fortune.

“To strengthen our health, we need to think of our businesses having theaters in the front with a factory in the back,” he recently told investors.

One of the first changes under the new CEO is charging customers a dollar if they order a Refreshers fruit drink without water because it requires more ingredients to be added. Many Starbucks customers took to social media, calling the coffee chain “greedy” and “stingy,” but others applauded the company on the move, as the recent trend toward TikTok menu hacks hold up the line.

Narasimhan believes that everything a customer sees when they walk into Starbucks should add to their in-store experience, while everything behind the counter should operate like a “well-oiled machine with as little waste, duplication and complexity as possible,” writes Fortune.

“Currently we have over 1,500 cup and lid combinations across our network. As we streamline, we will create a portfolio of fewer, more sustainable and less costly cups while further simplifying operations in our stores,” Narasimhan said. “All of these opportunities will deliver topline growth and margin expansion.”

Also, the CEO has moved on from the Starbucks rule of thumb “if something isn’t broken, don’t fix it.”

“As a leadership team, we fully acknowledge a need to evolve and modernize our brand, our business, our capabilities and our culture to meet the needs of an ever-changing world. We are therefore re-founding the company and as part of that we are getting back to its basics.”

CNBC recently reported that Narasimhan plans to work a shift at one of the company’s stores at least once a month.

“To keep us close to the culture and our customers, as well as to our challenges and opportunities, I intend to continue working in stores for a half day each month, and I expect each member of the leadership team to also ensure our support centers stay connected and engaged in the realities of our stores for discussion and improvement,” Narasimhan wrote in a letter to employees.

Starbucks updated its rewards program earlier this year, making it harder for members to earn free menu items. Customers will need to earn an additional 50 to 100 points (or stars) to receive bonus food and beverages, with free items ranging from free hot coffee to a bag of coffee beans. In the three months ended October 2, 2022, the number of active Starbucks rewards members jumped to 28.7 million, up 16% year over year.

“The rewards program … is generating significant revenue for Starbucks,” said former CEO Howard Schultz during a November 2022 analyst call.

The company has been experimenting with its loyalty program in recent months. In October, Starbucks and Delta Airlines connected their loyalty programs, allowing U.S. customers who are enrolled in both Delta SkyMiles and Starbucks Rewards loyalty programs to earn one mile per $1 spent on eligible purchases at Starbucks. In December, Starbucks launched Starbucks Odyssey, which is an extension of the rewards program that allows users to earn NFTs.

A free NACS webinar is available that shows retailers how to improve their current loyalty program.

Also, NACS published a free report on how convenience retailers can build loyalty program affinity beyond rewards. It provides insights on c-store loyalty programs, shopper expectations, program engagement, personalization and program access/communication.