Starbucks is in trouble. The year had started badly, but now the drop in sales and revenues indicates a real crisis for the coffee giant born in 1971 in Seattle and now has over 30 thousand locations around the world. But the change of leadership and the latest strategies do not seem to bring the multinational back to its former numbers.
After a start to 2024 already marked by less than encouraging results, the data from the last quarter confirm the negative trend in global sales and a decline in share values. The chain saw a 7% reduction in sales compared to the same period last year, accompanied by a 3% contraction in revenues, which stood at 9.1 billion dollars, against the 9.4 billion expected by analysts.
In the United States, the chain’s historic and main market, the drop in sales is around 6%, signaling that attempts to attract customers with new promotions and an expanded range of products have not had the desired effect. Starbucks said increasing competition and reduced spending on non-essential goods by American consumers had an impact negatively on the patronage of its stores. The situation appears even more serious in China, the second most important market for Starbucks, where the collapse in sales reached 14%. One of the main causes is the proliferation of local chains, often characterized by similar logos and colours, which are taking away customers from the American multinational.
The current crisis has been accentuated by post-pandemic economic difficulties, which have reduced the spending power of consumers in numerous markets. In the United States, many customers are looking for cheaper alternatives to reduce their daily expenses. In China, however, the decline in demand is linked to a series of complex economic factors, such as economic uncertainty but also the growing preference for local brands. Starbucks has also had to deal with a significant increase in raw material costs: the prices of Arabica and Robusta coffee beans have grown significantly in the last year, reducing profit margins for the company.
For now, the change in leadership has served little purpose. This summer Brian Niccol took over from Laxman Narasimhan as CEO. Niccol has already stated that the current situation requires a radical review of company strategies and has paused financial forecasts for next year given the uncertain outlook.
The publication of the multinational’s financial data had an immediate impact on Starbucks shares on Wall Street. After the announcement, the stock recorded a decline of more than 4% in the after-hours market, marking a worsening even compared to the slight increase of 0.38% recorded during the day on the New York Stock Exchange. The company’s shares, moreover, have been in a stagnant phase for several years, accumulating an overall loss in value since the beginning of 2019.
The challenge is finding a balance between maintaining a loyal customer base and attracting new consumers. Niccol spoke of the need to return to the origins, leveraging the distinctive values of the brand. But will it be enough to counter the loss of customers and catch up with the main (and often cheaper) competitors?
