Starbucks, the world's largest coffee chain, is facing a challenging period under new CEO Brian Niccol. In a preliminary report released this week, the company announced a sharp decline in third-quarter sales, prompting efforts to address the crisis.
For the quarter ending September 29, global sales fell by 7%, with a 6% decline in the U.S. and a 14% drop in China. In light of this negative trend, Starbucks has suspended its financial targets for the year.
This development led to a nearly 5% drop in stock prices on Wednesday. Niccol indicated that the company's financial performance clearly shows the need for a fundamental strategic shift.
In the approximately month since taking office, he identified key issues such as an overly complex menu, staff shortages in stores, and pricing of beverages and food. However, the primary issue is a boycott.
Starbucks, facing protest and boycott campaigns due to Israel's attacks on Gaza, has seen its financial results negatively impacted over the past three quarters. The coffee chain lowered its annual sales forecast during the October-December period last year, partly due to weak sales in stores in the Middle East.
The company's revenue fell by 2% in the January-March period, and global sales recorded a 4% decline, marking its first drop since the end of 2020. Starbucks also reported a 3% decline in global sales during the April-June period.
One of Niccol's biggest changes has been reshaping the marketing strategy. Starbucks recently launched ASMR-like advertising campaigns focusing on the sound and visual appeal of handcrafted coffee drinks.
Additionally, the company shifted its marketing from loyalty program members to a broader customer base. Niccol emphasized that Starbucks has always been a place for people to gather, and the stores are being reviewed to ensure they provide the services customers expect from a community coffeehouse.
It is believed that Niccol aims to restore the spirit of Starbucks as a "community coffeehouse," which will play a significant role in the company's growth.
Starbucks will release its full financial report on October 30.
