Starbucks outlined how it is revamping processes across its stores and supply chain, deploying more automation and simplifying work for its all-important baristas. The presentations from a bevy of Starbucks executives highlight how reinvention and continual process improvements go together.
The reinvention plan, outlined at Starbucks' Investor Day, comes as the coffee giant adapts to demand shifts. For instance, cold beverages, which are often customized, are outpacing hot beverage growth. A surge in volume, customization and multiple ways to order have created store bottlenecks.
At the company's investor meeting it was evident that Starbucks is retooling to prepare for the future, which revolves around the intersection of partners (employees), customers and store. Starbucks is projecting earnings per share growth of 15% to 20% annually over the next three years with global and US same-store sales rising 7% to 9% annually. By the end of 2025, Starbucks expects to have 45,000 locations worldwide.
To hit those numbers, Starbucks will continually improve its processes on multiple fronts.
Frank Britt, Executive Vice President and Chief Strategy and Transformation Officer at Starbucks, said the company approach is designed to include the lifetime value of a partner as well as a customer. "If we create more value for partners, the benefits are enormous. We spend less money to acquire relationships because we have higher retention, and we get more value. This idea is very much in the new thinking of Starbucks," said Britt.
To drive this partner value, Starbucks will create an experience innovation center and create complementary store and operations processes, said Britt.
Here's a look at how Starbucks is addressing process excellence on multiple fronts.
Store, processes and barista workflows
Starbucks executives said the company will reinvent its stores to be more purpose-built for demand shifts such as cold brew, mobile ordering and drive-through.
"We are reimagining the future of our stories and what it looks like for our partners as well as customers," said John Culver, group president of Starbucks North America and Chief Operating Officer.
Culver added that Starbucks would "reduce complexity and make work easier for our partners" so they can spend more time with customers. To get there, Starbucks will simplify tasks tied to preparing drinks and food and leverage automation. Culver added that Starbucks will invest $450 million in its existing US store base in fiscal 2023 with continued investment in fiscal 2024 and 2025.
Upgrades include redesigned preparation areas, a proprietary cold brew system and supply chain automation. "The surge in volume has caused bottlenecks in our stories. Keeping up with this demand has challenged our partners and their ability to balance speed, craft and connection," said Culver.
Starbucks is simplifying tasks across beverages and food. The new processes and Siren System were created with Starbucks engineers and front-line workers.
A few highlights:
New processes will enable a barista to make a Mocha Frappuccino 51 seconds faster than the 86 seconds for the current process today.
A new brewing system called Clover Vertica can freshly grind and brew a cup of coffee in 30 seconds with improvement in quality and waste reduction.
Cold brew technology today is steeped for 20 hours and takes more than 20 steps to make. The new process automatically grinds and presses coffee beans and cuts waste by 15%. Culver said:
"Across 16,000 stores, 365 days a year, (cold brew) takes a lot of time. When you consider that we spend more than $50 million a year on labor to brew our cold coffee this is a significant game changer for us. From 20 steps to 4 and from 20 hours to a matter of seconds we are completely reinventing the experience for our partners and customers."
Howard Schultz, Starbucks' interim CEO, said new faster processes and the Siren System won't impact quality. "I can't tell you how many hours each of us spend on ensuring the quality of the coffee is at the same level of spend for the history of our company. And in fact, we are sourcing and roasting the highest quality coffee more so than any other time in our history. And the proof of everything we do has to be in the cup," said Schultz.
Supply chain automation
Culver said Starbucks has implemented automated ordering for merchandise and food in stores. Culver explained how automation in the supply chain would free up time for partners. He said:
"We implemented automated ordering across all of our stores for food, as well as merchandise. This work we've done on automation has enabled us to reduce the time spent by partners doing manual counting of SKUs daily. In addition, we're leveraging our analytics and insights team to get the right products in the right stores at the right time."
Culver added that the automated ordering has boosted food and merchandise sales and Starbucks is currently working on automated ordering for beverages. Another benefit will be significant waste reduction at stores.
Starbucks said its store portfolio will encompass multiple formats whether it's a cafe, delivery, pick-up only or drive thru. Process excellence will enable Starbucks to hit its KPIs, including:
50% return on store investment.
2-to-1 sales to investment ratio.
25% cash margin.
Starbucks will also look to bake fresh food in its US stores, a system that's deployed in some locations globally already. Rachel Ruggeri, CFO of Starbucks, said the company expects headwinds related to supply chain, commodity prices and inflation, but expects supply chain savings to help fund continued investments.
System transformation and optimization
Deb Hall Lefevre, Starbucks Chief Technology Officer, said the company's technology strategy and processes will revolve around enabling partners as well as customers. "We will never replace our baristas," said Lefevre. "We are instead laser focused on how we enable our partners. Our job is to automate the work and simplify it, so their job is easier and more joyful."
Lefevre said Starbucks will leverage real-time data to automate store tasks, provide task management tools and build playbooks for shifts. "Things just need to work," she said.
Starbucks will stabilize its digital channel and build resilience and also "modernize and simplify our architecture to scale new ideas and innovation faster," she said. "We will unlock ourselves from the shackles of monolithic systems."
Much of Starbucks' system transformation plans revolve around optimizing store operations. Lefevre said the company will focus on multi-tasking tools, multi-use hardware and supporting shifts with technology to speed up service, remember customer favorite orders and automate tasks.
"We have a number of things in flight that automate tasks and streamline processes," said Lefevre, who added that handheld ordering, automated receiving and counting and automated ordering are efforts that will free up partners to connect with customers.
Scenes from the process economy: