Starbucks has long been a symbol of coffee culture, but things are changing. Once, you’d find a Starbucks on almost every corner, but that era may be fading.
For years, Starbucks focused on rapid expansion. It became a running joke when comedian Lewis Black joked about two Starbucks being across the street from each other in Houston. However, today’s reality looks different. Increased competition, rising costs, and changing customer preferences are impacting the coffee giant.
This month, Starbucks plans to close about 1% of its North American stores. This closure comes with a major restructuring effort set to cost the company $1 billion. CEO Brian Niccol noted that some of these locations weren’t meeting customer expectations or profits.
Though closing around 400 stores seems small compared to the company’s 32,000-plus locations globally, it’s still a significant shift. It reflects changing consumer behavior, especially after the pandemic led many people to move from urban areas. RJ Hottovy, an analyst from Placer.ai, explains that Starbucks is letting go of leases in spots where foot traffic has dropped.
The coffee chain faces growing competition from independent coffee shops and newer chains like Blank Street Coffee. Furthermore, 70% of Starbucks customers cited high prices as a reason to visit less often, especially among those earning under $100,000 annually, according to a recent UBS survey.
Overall, Starbucks is dealing with a tough landscape. Rising inflation and aggressive competition from drive-thru chains like Dutch Bros have made their comeback challenging. As sales have dropped for multiple quarters, stock prices have slipped nearly 9% this year.
Despite these challenges, there is hope. Niccol, who previously turned around brands like Chipotle, became Starbucks’ CEO in September 2024. Investors have high hopes for him, given his impressive track record. He earned about $100 million in compensation last year.
Niccol envisions repositioning Starbucks as a “third place” between home and work. He believes the company strayed too far into mobile orders, making it feel less personal. Changes include bringing back the fun of baristas doodling on coffee cups and enhancing the in-store atmosphere with seating and better layouts.
Starbucks plans to renovate 1,000 stores to create cozy spaces for customers. However, some employees voice concerns about new drink recipes and the extra stress during busy hours. Despite these challenges, many analysts believe Niccol’s approach is on the right track, showcasing early signs of progress and potential for substantial improvements in the future.
As Starbucks navigates this tricky landscape, it remains to be seen how these changes will reshape its future. The journey is complex, but with new strategies and a focus on customer experience, the iconic coffee chain might just find its way back to the hearts of coffee lovers.
For more insights on Starbucks and its strategic shifts, you can check out the latest reports from [CNN](https://www.cnn.com) and [UBS](https://www.ubs.com).
