What Can We Learn From Starbucks’ Disappointing Quarter?

Former CEO Howard Schultz chimes in with advice: Keep innovation ‘coffee-forward.’

May 07, 2024

Starbucks announced last week that same-store sales in the United States dropped 3% in the first quarter of 2024.

“In a highly challenged environment, this quarter’s results do not reflect the power of our brand, our capabilities or the opportunities ahead,” Laxman Narasimhan, chief executive officer of Starbucks, said in a statement.

“We continue to feel the impact of a more cautious consumer, particularly with our more occasional customer,” Narasimhan said on the company’s earnings call.

“The coffee giant is viewed by many analysts as a bellwether for consumer spending, which accounts for nearly three-quarters of the nation’s economic activity. The company's latest struggles, in turn, raise a question: Is the engine of the U.S. economy faltering, or is something wrong at Starbucks?” asked ABC News.

“Starbucks could charge a premium because it’s a little bit special,” Cait Lamberton, professor of marketing at the University of Pennsylvania’s Wharton School, told ABC News. “Now, they’re charging $6.50 for people to walk in and walk out 10 seconds later.”

Former CEO Howard Schultz offered his advice via LinkedIn. “The go-to-market strategy needs to be overhauled and elevated with coffee-forward innovation that inspires partners, and creates differentiation in the marketplace, reinforcing the company’s premium position. Through it all, focus on being experiential, not transactional.”

He also wrote: “The stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in data, but in the stores.”

Meanwhile, the company introduced its spin on boba: raspberry-flavored pearls. This latest lineup includes Summer-Berry, Summer-Berry with Lemonade and Summer Skies Drink, made with creamy coconut milk. The drinks are blue in color, a first for the beverage purveyor.

Unlike chewy boba (made from tapioca) these pearls pop, releasing what People called a “quick flavor zap [that] makes for a fun, new beverage.”

Read more about Laxman Narasimhan.