From Tacos to Bucks: Niccol’s Brewed Up Success

The appointment of Brian Niccol as Starbucks' new CEO is set to bring substantial changes to the company's strategy and real estate portfolio. Niccol, known for his successful stints at Taco Bell and Chipotle, is recognized for his digital transformation expertise and focus on customer engagement. His leadership at Chipotle nearly doubled its revenue and increased its stock price by almost 800%​. This track record, coupled with his innovative approach at Taco Bell, positions him well to address Starbucks' current challenges, including evolving consumer preferences and heightened competition in the coffee space.

Niccol’s has mentioned that the Starbucks experience “can feel transactional, menus can feel overwhelming, product is inconsistent, the wait too long or the handoff too hectic. These moments are opportunities for us to do better.” Niccol, also calls himself a longtime Starbucks customer, outlined four areas for improvement: the barista experience, morning service, its cafes and the company’s branding.

To tackle those challenges, Starbucks will invest in tech to improve baristas’ working conditions and allow them to craft drinks more quickly, make the company’s supply chain more efficient and upgrade its app and mobile ordering.

In his open letter to all partners, customers and stakeholders Niccol’s mentions “that our stores have always been more than a place to get a drink. They’ve been a gathering space, a community center where conversations are sparked, friendships form, and everyone is greeted by a welcoming barista. A visit to Starbucks is about connection and joy, and of course great coffee, however they are not delivering this right now.” I couldn’t agree more with this as I think people have been moved from Starbucks being a gathering/meeting place to a grab and go offering. I remember when I first got into Commercial Real Estate almost every second meeting was at a Starbucks; now it’s one in every ten meetings; their seems to be better offerings in terms of coffee or atmosphere.

Niccol’s goes into further details about the four key areas that he know’s will have the biggest impact:

1. Empowering our baristas to take care of our customers: They want to make sure their baristas have the tools and time to craft great drinks every time, delivered personally to each customer. For there employees, he wants to build on the tradition of leadership in retail by making Starbucks the best place to work, with career opportunities and a clear path to growth.‍
2. Get the morning right, every morning: People start their day with Starbucks, and they need to meet their expectations. This means delivering outstanding drinks and food, on time, every time.‍
3. Reestablishing Starbucks as the community coffeehouse: They are committed to elevating the in-store experience — ensuring the spaces reflect the sights, smells and sounds that define Starbucks. The stores will be inviting places to linger, with comfortable seating, thoughtful design and a clear distinction between “to-go” and “for-here” service.‍
4. Telling our story: It’s time for Starbuck’s to tell their story again — reminding people of our unmatched coffee expertise, our role in communities and the special experience that only Starbucks can provide. They won’t let others define who we are.

His initial focus is on the US but with an optimistic outlook on overseas markets that have struggled. Starbucks struggles overseas for several reasons, including cultural differences, local competition, and varying consumer preferences. In markets like China, increased competition from local coffee chains and economic slowdowns have affected growth. Additionally, Starbucks’ traditional cafe model does not always align with the needs of consumers in different regions, where tea or other beverages are more popular.

Real Estate Implications

Niccol’s history suggests a potential shift in how Starbucks approaches its real estate strategy. Under his leadership, Taco Bell expanded its international footprint and increased store openings, and at Chipotle, he focused on streamlining operations to drive profitability. This strategic mindset might lead Starbucks to rethink its store layout, I initially thought it would be to potentially moving away from large “third place” gathering spaces to more compact, high-efficiency stores aimed at digital order pickups and drive-thru options. However, I have heard from close sources that Starbucks want to go back to what made them great; plenty of sitting areas where people would work, have business meetings and designated pick-up areas that aren’t affecting the rest of the store. In short this will mean going to larger stores or better layed out stores to accomplish that.  with someone like Niccol’s at the helm and such dramatic growth and profits at both Chipotle and Taco Bell; I can see Starbucks trading even more aggressively than ever before on the Capital Markets.

Overall, Niccol’s appointment signals a shift toward operational efficiency and digital engagement, potentially transforming Starbucks' presence both in terms of store experience and real estate footprint. This could reshape Starbucks’ real estate strategy to prioritize digital growth, delivery, and urban expansion, making it a crucial period for stakeholders and investors to watch.

We’ll see how it all unfolds—will Starbucks stay on top, or will challengers like Dutch Bros steal the spotlight? Maybe emerging concepts like Blank Street Coffee, with their tech-forward approach, affordable offerings, and superior customer experience, will redefine the game. Only time will tell. For now, let’s just savor every sip and keep enjoying that perfect cup of coffee—morning, afternoon, or anytime in between.

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Source: https://stories.starbucks.com/press/2024/back-to-starbucks/