Starbucks’ Grande Post-Pandemic Plan
Executives Expect a Quick Rebound
Yesterday Starbucks (SBUX) held its biennial investor meeting. COVID-19 has battered many industries, and the coffee shop industry is no exception. Starbucks’ sales fell 40% during the first months of the pandemic, but executives expect business to fully bounce back around the world before next September. “People will be back in Starbucks stores at a rate far beyond what they were pre-pandemic,” CEO Kevin Johnson said earlier this week.
Even as COVID-19 cases surge and certain parts of the US impose new lockdowns, Johnson has high hopes for Starbucks once a vaccine is widely distributed. Though it will likely take several months for vaccines to be manufactured, delivered, and administered, Johnson believes the vaccine will bring more stability for Starbucks and the rest of the economy.
Shaping the Starbucks Experience
The pandemic has given Starbucks an opportunity to rethink its strategies around store layouts and locations. The pandemic revealed that Starbucks is perhaps too dependent on foot traffic in city centers. It has also highlighted the opportunities for growth using a drive-thru model.
Starbucks expects demand for drive-thru coffee to be strong even once people return to pre-pandemic routines, and it is responding accordingly. As part of this new strategy, the chain will close 1,050 Starbucks branches and will open 2,150 new shops in different locations. But Starbucks is not completely tossing out its sit-down structure in favor of the drive-thru. Johnson said the cafe experience that has been so central to Starbucks’ model will only become more desirable after the pandemic ends.
To improve the in-person cafe experience, Starbucks is investing in technology that will allow employees to spend less time on inventory and administrative tasks and more time on customer service. As a part of this strategy, Starbucks also announced it will boost US wages by at least 10%.
Growth is an Anomaly in Coffee Space
Despite Starbucks’ optimism, the United States is on track to lose nearly 2,000 coffee shops in 2020. The pandemic has brought years of growth for the coffee shop industry to a halt. Starbucks’ balance sheets were able to withstand the pandemic downturn, but sadly, many smaller coffee shops will not be able to weather the storm.
Wall Street is watching Starbucks closely, and analysts expect it will be one of just a few of the large consumer companies whose earnings will see double-digit growth in 2022 and beyond. Despite the challenges it has faced, Starbucks’ stock now sells for 13% more than it did before the pandemic.
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