Commentary

Starbucks Says It's Leaning In, Responding To Customers' Feedback

Starbucks boosted its buzz yesterday after revealing it had 4% same-store growth for Q4 2018, even though its traffic declined 1%. The positive results had everything to do with the chain raising its prices between 10 and 20 cents a cup a few days after long-time leader Howard Schultz announced in June that he was stepping down as executive chairman to become chairman emeritus.

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“Starbucks shares were marked 8.4% higher in pre-market trading Friday, indicating an opening bell price of $63.70 each, a move that would boost the stock's year-to-date gain past 10% and value the Seattle, Washington-based chain at more than $86 billion,” Martin Baccardax reports for The Street. A delivery deal in China with online retailing giant Alibaba Group Holding is contributing to the positive vibe, he notes.

Starbucks is also “doubling down on Christmas with its new holiday cups,” as a CNN Business headline puts it, spearheaded by four new red and green designs that are said to be more “Christmassy” than some in recent times. 

“Last year, our stores didn’t sufficiently reflect the festive environment our customers know and love and have come to expect from us,” COO Roz Brewer said on a call with analysts Thursday after the markets closed. SeekingAlpha has published the full transcript of that session here

“We leaned into that feedback and starting tomorrow, we’ll unveil our full holiday assortment more than a week earlier than last year with the support of a more robust media plan,” Brewer continued.

The company has actually drawn ire for several years now.

“In 2015, the chain's minimalist red cups faced backlash after a video claiming that Starbucks ‘removed Christmas from their cups’ went viral. The cups quickly became a topic of discussion for major publications, late-night talk show hosts, and even Donald Trump, then a presidential candidate,” who suggested a boycott might be in order, Kate Taylor writes for Business Insider.

“Starbucks figured out what customers wanted in a few different ways, Brewer said,” Danielle Wiener-Bronner reports for CNN Business. “Employees asked for feedback and comments in person, and the company gathered information about preferences through its digital platforms like the mobile app.

“Starbucks uses seasonal items to build excitement around products and help market the brand. This year, there will also be a big marketing push behind the seasonal cups as part of Starbucks’ overall media strategy Brewer said,” Wiener-Bronner adds.

Indeed, the cups have larger purposes than just exuding holiday cheer.

“The company plans to offer a 50-cent discount on drinks served in seasonal reusable cups after 2 p.m. during the next two months,” Benjamin Romano writes for the Seattle Times. “The coffee company usually gives customers 10 cents off a drink if they bring their own cup. The increased incentive, running through early January, is part of an ongoing effort to drive business to Starbucks stores in the afternoons and a broader sustainability initiative aimed at reducing waste from disposable cups.”

Under Kevin Johnson, who took over the CEO role from Schultz in April 2017, “the company is focusing on knowing the preferences of more visitors so it can better target them with offers that appeal to their ordering behavior. Starbucks recently opened its mobile order app to everyone -- not just to customers signed up for its rewards program -- and brought in 4 million new digitally registered customers in the past quarter,” the Wall Street Journal’s Julie Jargon writes following an interview with Brewer. And the number of active members in its loyalty program is up 15% to 15.3 million.

“In the afternoon, when the chain has experienced weak traffic, Starbucks is reducing the time employees spend on administrative tasks so they can focus on customer service. It is also testing healthier Frappuccino drinks, which tend to be an afternoon treat,” Jargon reports.

But the design of the new cups is unlikely to tone down attacks from Starbuck’s devout critics.

“Beth Egan, an associate professor of advertising at Syracuse University, tells the Washington Post’s Michael Brice-Saddler that she doesn’t think the latest batch of cups reflect Christmas or any one holiday in particular.

“They have a nice array of images that sort of play to Christmas from the red and green standpoint,” Egan said. “But if you look at the star, it could just as easily be a Star of David.”

“Egan said she thinks some groups, such as conservative Christians, may be actively looking to pick fights with Starbucks’s designs because of the stances the company has taken on certain issues, such as same-sex marriage,” Egan adds.

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