image source, Getty Images
- Author, Natalie Sherman
- Role, BBC news
- Report from New York
Andrew Buckley, a self-described “mocha guy,” recently swore off his habit at Starbucks when he staggered after the company’s latest price hike pushed the price of his drink above $6.
The 50-year-old, who works in technology sales in Idaho, has been a loyal customer for decades and values his near-daily mocha as a small luxury that allows him to stretch his legs during the work day.
But the company’s latest price hike crossed the line.
“It was the straw that broke the camel’s back about my feelings about inflation in general. It’s like, ‘This is it. I can’t do this anymore,'” says Mr. Buckley, who called customer service with complaints before taking to social media. media for ventilation.
“I just lost it,” he said. “I don’t plan on going back either.
The decision was a sign of bigger problems at Starbucks, which is facing renewed opposition from inflation-weary customers, as well as union battles and protests against the company that oppose Israel’s war in Gaza, fueling calls for boycotts and tarnishing the brand.
image source, Andrew Buckley
The company’s revenue at the start of 2024 fell 1.8% year-on-year globally.
In the U.S. — by far the company’s biggest and most important market — sales at stores open at least a year fell 3%, the biggest decline in years outside of the pandemic and the Great Recession.
Among those jumping were some of the firm’s most loyal customers — rewards members, whose active numbers saw a rare 4% drop compared to the previous quarter.
Former regular David White says he’s stopped nearly all of his shopping at Starbucks in recent months, sometimes abandoning orders mid-purchase, horrified by the totals in his cart.
He says his anger at the price hike has been fueled by the company’s other decisions, including its crackdown on workers trying to form unions.
“They got too full of themselves,” says the 65-year-old from Wisconsin. “They are trying too hard to squeeze out their everyday customers and profit through their staff and prices.”
For Andrew Buckley, the decision to leave the firm came down to pricing, but he notes that the various noises around the firm about 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.
On a conference call to discuss the company’s latest results, Starbucks CEO Laxman Narasimhan said sales were disappointing, partly citing more cautious customers, while acknowledging that “recent misinformation” had affected sales, particularly in the Middle East.
He defended the brand and promised to bring back business with new menu items such as boba drinks and a pesto egg sandwich, faster in-store service and a flurry of promotions.
CFO Rachel Ruggeri said this week that the company is showing signs of recovery and has seen an increase in active reward members.
The firm is not backing down from its expansion plans, but has warned investors that the challenges won’t go away so quickly.
“We believe it will take time,” she said.
The firm’s struggles have stirred debate over whether they are a kind of warning from canaries in the coal mine that the hapless consumer spending that has fueled the world’s largest economy in recent years may suddenly run out of steam.
Like Starbucks, a number of other big fast-food brands, including McDonald’s, Wendy’s and Burger King, reported softening sales and announced a discount spree to try to revive enthusiasm.
However, many analysts believe Starbucks’ sales decline says more about the company than the broader economy.
“When you look back and see the magnitude of the shift … that occurred in such a short period of time, it’s not usually indicative of something that’s intrinsically macro or price-related,” says Sharon Zackfia, head of consumer at investment management firm William Blair, who last month raised concerns with clients that the brand may be losing its luster.
image source, Getty Images
The company was already under pressure from a years-long battle with union activists who raised concerns about pay and working conditions that were at odds with the firm’s progressive reputation.
In late October, after Starbucks sued the union over a social media post expressing “solidarity” with the Palestinians, the dispute landed amid debate over Israel’s war in Gaza, sparking global boycott calls that took on a life of their own.
Starbucks — not the only American brand to face backlash over the issue and not a target of the official Boycott, Divestment and Sanctions (BDS) movement — accused its views of misinformation after issuing a blanket statement condemning the violence in the region.
It has also taken a different approach to the union in recent months, with both sides now issuing joint press releases saying progress has been made in treaty negotiations.
However, calls for a boycott on social media increased in January and continue to persist, according to Bank of America analysis.
Last month, YouTube comedian Danny Gonzalez apologized to his 6.5 million followers for the accidental presence of a Starbucks cup in a recent video following a backlash.
Although Starbucks management remained relatively quiet on the subject during sales discussions, as Ms. Zackfia puts it, “You’d really be burying your head in the sand not to think it had an effect.”
Bank of America analyst Sara Senatore says she was initially skeptical that the boycott would have much of an impact, but other causes seemed insufficient to explain such a sudden and sharp drop in sales, noting that the firm’s price increases are not out of line with the competition. .
He says the quick turnaround could be a tall order, comparing the fallout to the brand crisis Chipotle faced after its stores were found responsible for an e-coli outbreak that took years to shake off.
“All you can do is try to dampen the sound or basically overcome it with other things,” he says. “Maybe it’s just a matter of time.
On a recent sunny afternoon in New York City, where the density of Starbucks coffee shops is one of the highest in the world, it was hard to gauge the state of the business.
Some stores looked empty until customers rushing to place a mobile order disturbed the calm.
Even loyal drinkers said they saw opportunities for improvement.
Maria Soare, a 24-year-old in town from Washington, D.C., still picks up drinks from the company three or four times a week, but her favor has dimmed since the pandemic served as an excuse to get out. House.
He says the recent price hike “stung” and advises the company to “change the food”.
For friends Veronica and Maria Giorgio, the feeling of society has changed.
Veronica, 16, says she doesn’t go as much anymore because of a combination of better options elsewhere, skyrocketing prices and recent protests by labor activists.
“It opened my eyes,” he says. “It feels more like a chain to me.
And while Maria Giorgia remains a regular customer, the 17-year-old says her perception of the business has changed.
“It used to be cool in high school. Now it’s just comfortable.”