Seattle — At Starbucks’ recent biennial Investor Day in Seattle, interim CEO Howard Schultz, CFO Rachel Ruggeri and other Starbucks leaders showcased the company’s Reinvention plan, which aims to invest in partners, customers and stores. The plan is expected to accelerate the company’s long term growth, progressively expand operating margin and drive high-teens non-GAAP EPS growth annually through fiscal 2025.
“As we execute on our Reinvention plan, we are building on our 51-year history of market leading innovation to position our business and our brand for the next chapter of growth,” says Schultz. “Guided directly by our partners, we have already begun to take action on an inspired roadmap to build the future of Starbucks, all while staying true to our mission of uplifting communities through a shared love for coffee and further extending our coffee leadership and innovation. I am confident that our partners and world-class leadership team will capture the significant global growth opportunity ahead, unlocking value for all our stakeholders.”
Schultz also introduced incoming CEO Laxman Narasimhan, who shared his enthusiasm for the Reinvention plan. Narasimhan will officially join Starbucks on October 1, 2022 and will work closely with Schultz before assuming the CEO role and joining the board in April 2023. Schultz will remain as a member of the board after the transition.
In connection with its Reinvention plan, Starbucks introduced a framework for accelerated earnings growth over the next 3 years, underpinned by enhanced comparable store sales growth, increased store count growth, continued margin expansion and disciplined capital allocation.
From fiscal 2023 to fiscal 2025, Starbucks expects comparable store sales growth to be in the range of 7% to 9% annually, both globally and in the U.S., up from the previous range of 4% to 5%.
The company’s global store portfolio is expected to grow by roughly 7% annually on a net basis from fiscal 2023 to fiscal 2025, up from the previous estimate of approximately 6%. Starbucks also expects to continue robust store development in China, with net unit growth of approximately 13% annually. Globally, Starbucks expects to approach 45,000 stores by the end of 2025, and is well on track to reach approximately 55,000 stores by 2030.
Starbucks now expects global revenue growth in the range of 10% to 12% annually from fiscal 2023 to fiscal 2025. This represents an improvement from the company’s previous range of 8% to 10%.
As plans to invest in its people, Starbucks plans to expand opportunities to increase overall pay, as well as offering enhanced sick pay, new savings and student loan management benefits, and additional mental health support. The company will also invest in store managers, including through new leadership trainings, reinvention of scheduling and decisioning tools, and career journey mapping to improve store manager retention and empower them to focus on core functions of the job. Stores managed by partners with over 3 years of tenure have 13% greater weekly sales and higher customer satisfaction.
This work is beginning with Starbucks’ over 9,000 U.S. company-operated stores. Starbucks then plans to rapidly implement the most effective and scalable best practices to its other U.S. and global stores.
As part of the Reinvention plan, Starbucks is unlocking the intersection of convenience and connection by introducing enhancements to the customer experience across retail and digital that meet customers wherever they are, expanding the Third Place experience beyond the physical store. As part of these efforts, Starbucks is investing in purpose-built store concepts, delivering beverage innovation and expanding effortless digital convenience.
To improve partner and customer experiences, Starbucks has developed the Siren System, a proprietary new equipment innovation designed to meet the growing demand for customization of hot and cold beverages and warm foods. As part of the Siren System, Starbucks has redesigned its cold beverage station, which significantly reduces the time and number of steps to make cold beverages, unlocking productivity gains and ultimately freeing up time for partners to connect with customers. In addition, Starbucks is developing a new way of extracting cold coffee and espresso with the Cold Pressed Cold Brew system. This new, proprietary technology delivers cold press coffee in a matter of seconds and in fewer than four steps, a step-change improvement when compared to today’s cold brew which is steeped for 20 hours and takes more than 20 steps to make. The Cold Pressed Cold Brew will begin testing in stores in fiscal 2023.
Starbucks is also elevating the quality and craft of hot brewed coffee with the launch of Clover Vertica. Using proprietary Clover technology, Clover Vertica offers every customer a freshly ground, freshly brewed cup of hot coffee in just 30 seconds. Starbucks has already begun rolling out this equipment to stores and expects it will be fully deployed to all U.S. stores in the next 3 years.
Additionally, Starbucks is growing its Starbucks Delivers program in the U.S. with a new partnership with DoorDash, which will expand to a national scale alongside UberEats in fiscal 2023.
To accelerate the rollout of the digital Starbucks experience around the world, Starbucks is unveiling Starbucks Digital Solutions, a platform created for its international markets to deliver a consistent digital experience for partners and customers in every location.
Even though it is Starbucks’ second largest market, China’s coffee market is still in its early stages. Starbucks expects to nearly double sales in China over the next 3 years; store count in China is expected to grow by 50%, reaching 9,000 stores.
Founded in 1971, Starbucks Coffee Company now has nearly 35,000 stores worldwide. For more information, visit www.starbucks.com.
SOURCE: Starbucks Coffee Company