Is trouble brewing at the coffee giant?

By Natalie Sherman, bbc news

Getty Images Woman sitting at a table drinking a cold Starbucks drink through a straw while looking at her mobile phonefake images

Andrew Buckley, a self-described “mocha guy,” recently kicked his Starbucks habit, reeling after the company’s latest price increase pushed the cost of his drink above $6.

The 50-year-old, who works in technology sales in Idaho, had been a loyal customer for decades and treasured his venti mocha almost daily as a little luxury that allowed him to stretch his legs during the workday.

But the company’s latest price increase crossed the line.

“It was the final straw for my feelings about inflation in general. It’s like, ‘That’s it. I can’t do it anymore,'” says Buckley, who called customer service to complain before heading to the offices. social networks. means to ventilate.

“I just lost it,” he said. “I don’t plan to go back either.”

The decision was a sign of bigger problems brewing at Starbucks, which is encountering new resistance from inflation-weary customers just as unionization fights and protests against the company, presented as a form of oppose Israel’s war in Gaza, are sparking calls for boycotts and tarnishing the brand.

Andrew Buckley Andrew Buckley standing with his arms crossed in his kitchen next to his coffee machineAndrew Buckley

Andrew Buckley now makes coffee at home or goes to The Human Bean, a smaller chain

The company’s sales fell 1.8% year-on-year globally in early 2024.

In the United States, by far the company’s largest and most important market, sales at stores open at least a year fell 3%, the biggest drop in years outside of the pandemic and the Great Recession.

Among those jumping ship were some of the company’s most engaged customers: rewards members, whose active numbers marked a rare 4% drop compared to the previous quarter.

Former regular customer David White says he has stopped nearly all of his Starbucks shopping in recent months, sometimes abandoning orders mid-purchase, horrified by the totals in his cart.

He says his outrage over price increases has been reinforced by other company decisions, including a crackdown on workers trying to unionize.

“They’ve gotten too full of themselves,” says the 65-year-old from Wisconsin. “They are trying to squeeze too much out of their daily customers and make profits through their employees and prices.”

For Andrew Buckley, the decision to leave the company was due to prices, but he notes that the various rumors surrounding the company on political issues have left a bad taste in his mouth.

“This is a coffee shop. They serve coffee,” he says. “I don’t want to see them on the news.”

In a conference call to discuss the company’s latest results, Starbucks CEO Laxman Narasimhan said sales had been disappointing, citing in part more cautious customers, while acknowledging that “recent misinformation” had weighed on sales, especially in the Middle East.

He defended the brand and promised to win back business with new menu items such as boba drinks and a pesto egg sandwich, faster service in stores and a flurry of promotions.

Chief Financial Officer Rachel Ruggeri said this week that the company was seeing signs of revival and noted growth in active rewards members.

The company has no intention of backing down on its expansion plans, but warned investors that the challenges will not go away quickly.

“We think it will take some time,” he said.

Veronica with long curly blonde hair in a ponytail, wearing glasses and a black tank top, and Maria Giorgia (right) with blonde hair up and wearing a blue-gray sweater, sitting in a Starbucks

Friends Veronica (left) and Maria Giorgia (right) say they’ve noticed an increasingly corporate atmosphere at Starbucks.

The company’s problems have sparked debate about whether they are some kind of warning that the carefree consumer spending that has fueled the world’s largest economy in recent years could be abruptly losing steam.

Like Starbucks, many other big fast food brands, including McDonald’s, Wendy’s and Burger King, have reported declining sales and announced deep discounts to try to reignite enthusiasm.

But many analysts believe Starbucks’ declining sales reveal more about the company than the broader economy.

“When you look back and see the magnitude of the change… that happened in such a short amount of time, that generally doesn’t point to something that’s macro in nature or price-related in nature,” says Sharon Zackfia, chief consumer officer at the investment management firm William Blair, who expressed concern in a note to clients last month that the brand could be losing its shine.

Getty Images Activists from the Chicago Palestine Youth Liberation group protest in front of a Starbucks in Chicago with Palestinian flags.fake images

There have been protests outside Starbucks branches across the country and calls for a ceasefire between Israel and Hamas.

The company was already under pressure from a years-long fight with union activists, who have raised concerns about wages and working conditions that clashed with the company’s progressive reputation.

Then in late October, after Starbucks sued the union over a social media post expressing “solidarity” with Palestinians, the dispute landed it in the middle of debates over Israel’s war in Gaza, sparking calls of global boycott that took on a life of their own.

Starbucks – not the only American brand facing backlash over the issue and not a target of the official Boycott, Divestment and Sanctions (BDS) movement – has blamed misinformation about its views, after issuing a general declaration condemning violence in the region.

It has also taken a different tack with the union in recent months: The two sides are now issuing joint press releases claiming progress in contract negotiations.

But calls for a boycott increased on social media in January and continue to persist, according to a Bank of America analysis.

Last month, YouTube comedian Danny González He apologized to her 6.5 million followers for the incidental presence of a Starbucks cup in a recent video following a backlash.

Although Starbucks executives have remained relatively quiet on the issue during sales discussions, as Zackfia says, “You’d really be burying your head in the sand if you didn’t think it had an effect.”

Sara Senatore, an analyst at Bank of America, says she was initially skeptical that the boycott would have a major impact, but other causes seemed insufficient to explain such a sudden and severe drop in sales, noting that price increases in The company does not stand out from its competitors. .

She says a quick turnaround could be a difficult task, comparing the impact to the brand crisis Chipotle faced after its stores were found responsible for causing e-coli outbreaks, which took years to eliminate.

“All you can do is try to muffle the sound or essentially override it with other things,” he says. “It may just be a matter of time.”

Maria Soare in a Starbucks cafe holding an iced drink

Customer Maria Soare thinks Starbucks needs to improve its food

On a recent sunny midday in New York, where the density of Starbucks coffees is among the highest in the world, it was difficult to assess the state of the business.

Some stores seemed empty, until customers rushing in to place a mobile order punctuated the calm.

Even loyal drinkers said they saw opportunities for improvement.

Maria Soare, a 24-year-old from Washington, D.C., still buys drinks from the company three or four times a week, but her patronage has eased since the pandemic, when it served as a reason to leave the house.

She says the recent price increases “sting” and advises the company to “change the food.”

For friends Verónica and María Giorgia, the feeling of the company has changed.

Veronica, 16, says she doesn’t go as much anymore due to a combination of better options elsewhere, rising prices and recent protests by labor activists.

“That opened my eyes,” he says. “She feels more like a chain.”

And although María Giorgia remains a regular customer, the 17-year-old says her perception of the company has changed.

“It used to be cool in high school. Now it’s just convenient.”

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