- Starbucks is known for its high prices, but the company claims it offers value
- But the chief executive admitted that slow service means he has lost customers.
- Starbucks boycotts, bad weather and customer cuts are also factors
Starbucks has had a disastrous start to the year, with tens of millions of customers heading to rivals or staying home.
Tim Horton’s, McDonald’s and Dunkin Donuts have taken market share from Starbucks in hot and cold beverages and food.
The company reported a drop in sales this week for the first time in almost three years, at the height of the pandemic. Only in November were record revenues recorded.
Multiple factors are to blame, including high prices, customers cutting back on spending and bad weather, but Starbucks’ CEO singled out slow service.
Starbucks’ growth has come thanks to complicated, customizable drinks like Frappuccinos in the summer or pumpkin spice lattes in the fall, but each one can take baristas several minutes to prepare.
Starbucks, in the first three months of the year, has lost millions of customers
Statbucks CEO Laxman Narasimhan said the slow service was putting off customers.
Starbucks Customers Are Abandoning Orders While In Line Because They Take Too Long
Starbucks, which has about 17,000 stores in North America, also warned investors on Tuesday that it would continue to see slow sales in the spring and summer.
Since then, stock analysts, CNBC’s Jim Cramer and the company itself have highlighted a number of factors that have been attributed to the unexpected slowdown in sales.
These also include boycotts of the Israel-linked brand and competition from rivals.
As for slow service, the company said it has seen millions of examples of customers who ordered items but then abandoned their drinks because they took too long.
“We have customers coming into our stores today, or paying for their orders by mobile phone, and not completing their transaction because of wait times,” CEO Laxman Narasimhan said in an interview with CNBC’s Jim Cramer this morning .
“Our team in the US has done a phenomenal job improving speed of service, but we see more opportunity in doing so.”
Customers have complained about waits on social media. On Tiktok, mikeylorenz0 complained He, for a black coffee, has to “wait 20 minutes”, while others order a “large iced sugar caramel marshmallow ugat”.
He called for an express line for people who just want basic drinks like a black coffee or a latte without modifications.
Starbucks stock hit a two-year low after the company’s dismal first-quarter earnings were released Wednesday night. Narasimhan went on CNBC to defend the company, but Cramer criticized him.
The CEO told CNBC that the quarter was also poor due to bad weather in the United States and sluggish demand in China, its second-largest market.
Price increases at cafes and restaurants last year have forced customers to ditch them and instead drink more coffee or eat lunch at home, hurting business for chains like Starbucks.
But rivals such as Tim Horton’s, McDonald’s and Dunkin Donuts were not facing the same problems, said CNBC’s Jim Cramer.
On TikTok, mikeylorenz0 complained that for a black coffee he has to “wait 20 minutes” while others order a “venti grande iced sugar candy marshmallow ugat.” He called for an express line for people who just want basic drinks like a black coffee or a latte without modifications.
Starbucks in Atlanta, Georgia, with a long line of cars at the drive thru
All three have recently said they are taking market share from Starbucks.
Speaking to investors on a post-earnings conference call on Wednesday, Narasimhan explained the reasons for the poor sales.
“Many customers are being more discerning about where and how they choose to spend their money, particularly as stimulus savings are mostly spent,” he said.
“We saw this materialize during the quarter as customers made trade-offs between eating out and eating at home.”