Starbucks’ reinvention plan includes snacking and tea innovations, rewards partnerships, and more

Starbucks updated investors on the restaurant company’s reinvention plan, including store upgrades, an emphasis on healthy snacks and tea, AI tools for rewards, and more

03 November 2023

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Starbucks is detailing major changes coming in 2024 and beyond

Starbucks executives updated investors Thursday on the company’s long-term reinvention plan – a multi-pronged approach that includes store improvements, menu innovation, investment in digital rewards and loyalty, and global expansion. Sara Trilling, Starbucks executive vice president and president of Starbucks North America, said that the company will be investing $1 billion alone in 2024, across multiple categories including wages, store improvements, digital innovation, and supply chain modernization.

Starbucks executives detailed how far that $1 billion investment will go in 2024, and beyond. Here are seven key takeaways:

Expect more mobile pickup stores, greener store formats, and more

Starbucks is yet again shifting the store mix in its portfolio three years after the Seattle-based coffee chain announced a closure of 400 stores to make way for express formats. On Thursday, Sara Trilling told investors that although small and nimble mobile pickup stores represent only 1% of the company store portfolio, they want to add more of these to alleviate pressure from traditional stores. By 2025, Starbucks hopes to serve 40% of its delivery orders through mobile pickup and express stores.

Trilling also said that over the next three years, Starbucks hopes to triple its greener store portfolio, in partnership with World Wildlife Fund. Greener Starbucks stores use less energy and water, among other examples of environmental leadership.

Help arrives for employees in high-traffic stores and during peak times

One of the problems Starbucks wants to help solve on the employee-facing side is to allocate more resources to alleviate pressure during high-traffic times and in busy locations. CEO Laxman Narasimhan said that the company is releasing new operational standards for mobile order and pay this fall to help with stores that receive a backup of orders across multiple channels.

“We’ve invested in new and more efficient equipment across our stores, which unlocks capacity and improves the partner experience,” Narasimhan said. “This is supporting the record levels of demand, as evidenced by our most recent performance. So, we’re going to leverage our renovation strategy, which is increasing to nearly 1,000 stores per year, to upgrade our stores while also controlling costs,” with upgrades that include the new siren system which was first announced last year.

Tech stack modernization is crucial, with AI at the forefront

One of the most important parts of improving both the customer and employee experience, Starbucks executives said, is by modernizing the company’s tech stack both at store level and at a higher level. The key element to this tech stack modernization is by digging deeper into AI resources:

“Included in the modernization of our tech stack is the extension of Deep Brew: our internally built predictive AI platform that allows us to innovate through data, hyper-personalized the Starbucks experience, and efficiently manage our stores,” Deb Hall Lefevre, executive vice president and chief technology officer of Starbucks said. “For example, Deep Brew now serves up alternate food and beverage recommendations [when products are out of stock], and we’re also refining our forecasting algorithms to improve our customers’ experience.”

To push the limits of digital tech advancement, Lefevre said Starbucks will be releasing new digital features on a two-week cadence moving forward.

Expanded tech partnerships with Microsoft, Apple, and Amazon

One of the major components of this invigorated technology innovation plan will be partnerships with outside tech companies. Starbucks mentioned starting up and expanding partnerships with Microsoft, Apple, and Amazon to get its store portfolio on the right path to AI-based efficiency. These new and improved partnerships would include:

  • Extending Starbucks’ innovation lab with Microsoft to “ingest trends and social media global food and taste preferences” and use Starbucks’ own transaction data to parse consumer preferences
  • Launching Starbucks’ first product innovation store with Apple to “streamline…inventory management, TikTok beverage builds and cleaning schedules”
  • Expanding customer experience through more Amazon One usage, particularly the company’s “just walk out” contactless payment technology

Starbucks wants to invest in more snacks

Beyond tech and operations, Starbucks executives said that they want to invest more in specific menu categories that research has shown resonate with customers. Purchasing trends for all-day breakfast and all-day snacking — specifically plant-based and wholesome options — will be a huge part of this menu revamp in the future.

“Snacking, it turns out, is one of the fastest growing macro consumer trends in the US, reaching a $110 billion market segment,” CMO Brady Brewer said. “We know our customers are looking for snacks and particularly wholesome and premium snacks. So, in addition to new grab and go food products will also offer a widening snack selection…. These fast-growing categories unlock the next level of growth, especially as our customers seek out these signature products.”

Refreshers and tea platforms will be expanded

On the beverage innovation side of things, Starbucks is investing in a couple of surprising segments of the menu: tea and Refreshers. According to Starbucks, at some points in the year, Refreshers actually outsell Frappuccinos. Plus, the tea latte platform is growing at 30% annually, which has led to the introduction of more variations on tea lattes, like the current holiday LTO, gingerbread oatmilk chai, as well as more seasonal flavors moving forward.

Introducing more external rewards partnerships

One of the final components Starbucks announced is more loyalty partnerships with external companies. This year, Starbucks partnered with Delta, in a first-of-its-kind relationship that allows Delta SkyMiles and Starbucks loyalty program members to earn points for both, by spending with both Delta and Starbucks. Starbucks hinted that more partnerships will be coming in the future, including a “leading financial institution” and a “world-class hospitality company” (likely these will be major banks like Chase or Bank of America, and a major hotel company like Marriott).

Source: Nation’s Restaurant News

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