- Starbucks is known for its high prices, but the company claims to offer value
- But the CEO admitted the slow service meant a loss of customers.
- Starbucks boycott, bad weather and fewer customers also a factor
Starbucks has had a disastrous start to the year, with tens of millions of customers heading to competitors or staying home.
Tim Horton’s, McDonald’s and Dunkin Donuts have all taken market share from Starbucks in hot and cold drinks and food.
The company this week reported a drop in sales for the first time in nearly three years, at the height of the pandemic. It was only in November that it recorded record revenues.
Several factors are to blame – including high prices, customers cutting back on spending and bad weather – but slow service was highlighted by Starbucks’ CEO.
Starbucks’ growth is driven by complex, customizable drinks like Frappuccinos in the summer or pumpkin spice lattes in the fall — but each can take baristas several minutes to complete.
Starbucks, in the first three months of the year, lost millions of customers
Statbucks CEO Laxman Narasimhan said slow service was delaying customers.
Starbucks customers abandon queue orders – because they take too long
Starbucks – which has about 17,000 stores in North America – also warned investors on Tuesday that its sales would continue to slow in the spring and summer.
A range of factors were blamed for the unexpected slowdown in sales and have been highlighted ever since – by stock analysts, CNBC’s Jim Cramer and the company itself.
It is also about the boycott of the brand linked to Israel and the competition from its competitors.
Regarding slow service, the company said it has seen millions of examples of customers ordering items but then abandoning their drinks because it took time.
“We have customers coming into our stores today, or paying for their orders via mobile, who are not completing their transaction because of wait times,” CEO Laxman Narasimhan said in an interview with Jim Cramer of CNBC this morning.
“Our team in the U.S. has done a phenomenal job improving speed of service, but we see more opportunity in this area.”
Customers complain about the wait on social media. On TikTok, Mikeylorenz0 complained that for a black coffee he had to “wait 20 minutes” while others ordered a “Venti Grand Iced Sugar Caramel Marshmallow Ugat.”
He called for an express line for people who just want basic drinks like a black coffee or latte without modifications.
Shares of Starbucks hit a two-year low after the company’s disastrous first-quarter results were released Wednesday evening. Narasimhan went on CNBC to defend the company, but was criticized by Cramer.
The CEO told CNBC the quarter was also bad due to bad weather in the United States and slow demand in China, its second-largest market.
Rising prices at cafes and restaurants last year forced customers to abandon them and drink more coffee or eat lunch at home, hurting the business of chains such as Starbucks.
But competitors like Tim Horton’s, McDonald’s and Dunkin Donuts didn’t face the same problems, said CNBC’s Jim Cramer.
On TikTok, mikeylorenz0 complained that for a black coffee he has to “wait 20 minutes” while others order a “venti grand icing sugar caramel marshmallow ugat.” He called for an express line for people who just want basic drinks like a black coffee or latte without modifications.
Starbucks in Atlanta, Georgia with a long line of drive-thru cars
All three recently said they were taking market share from Starbucks.
Speaking to investors during a post-earnings call on Wednesday, Narasimhan explained the reasons for the poor sales.
“Many customers are more discerning about where and how they choose to spend their money, especially when stimulus savings are mostly spent,” he said.
“We saw this materialize during the quarter as customers made trade-offs between eating outside the home and eating at home.”
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