Starbucks Navigating Headwinds: Service Quality, Stiff Competition, and Union Pressure

Coffee giant Starbucks seeks to regain customer loyalty amidst operational challenges and employee unrest.

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Dec 18, 2024
Summary
  • Service Quality, Competition, and Labor Issues Impact Q4 Results; New Strategy Aims to Restore Customer Loyalty
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The global coffee chain Starbucks (SBUX, Financial) experienced some problems concerning its operations, competition, employees.

In recent years the price of Starbucks drinks increased significantly higher than its competitors. In the same period many coffee shops and cafes popped up with similar menu at lower prices, giving Starbucks a slight competition there.

Higher price is not the only complaints that Starbucks received, long wait line and slow services with inconsistent service quality across the U.S. also add to the report that should be addressed. The challenges were reflected to the results as the Q4 consolidated net revenue was down to $9.1 billion only compared to $9.4 billion of revenue in the same quarter in 2023.

So now, CEO Brian Niccol's "Getting Customers Back to Starbucks" is the strategy theme that was stated in its fourth quarter 2024 report. The strategy includes adding olive oil coffee to the menu, no price increase promise in 2025 and enhance mobile ordering services to reduce wait times.

And not only from customers, but Starbucks also get challenges from its employees as 98% members of its workers union that comprises its 10,000 baristas have voted to conduct a strike anytime they deem necessary in near future. The union demands increase in wage, improve staffing and better schedules. But as of this article written the union hasn't decided to go on strike on a specific date.

From Starbucks, to improve employee benefits they have agreed to pay parental leave for workers from 6 weeks up to 18 weeks and the policy will take effect in March. Other benefits are still in negotiation.

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