How Brian Niccol brewed his ‘Back to Starbucks’ strategy

On the day in August 2024 when Starbucks named Brian Niccol as its next CEO, its stock leapt by almost 25%. It was “a nice compliment,” says the man who revived Chipotle Mexican Grill after a food poisoning crisis, but “there’s a part of me that wishes the stock didn’t move.”

Expectations for what one executive can do for a company have rarely been set higher. A year later, Starbucks’ stock is up a more modest 15%, and investors are asking how long Niccol’s plan will take to show results. This week he stepped up the pace of restructuring, announcing another 900 corporate layoffs and the closure of 1% of its US and Canadian stores — with an undisclosed impact on its barista headcount — at a cost of about $1 billion. “There is much more to do,” he told staff.

The task Niccol was handed, alongside a compensation package worth $96 million last year, was one of corporate America’s trickiest turnarounds. Starbucks has about 40,000 stores around the world — far more than Chipotle — and the ubiquitous coffee brand looked like it had lost its way.

Same-store sales were falling as inflation-battered consumers chose cheaper options; faster-moving rivals put the brand’s growth ambitions for China in question; unionized baristas were challenging its image as an enlightened employer; and Howard Schultz, Starbucks’ quasi-founder, had been cycling through CEOs.

“My high-level assessment was, you’ve got to get back to being a customer-focused, customer service company,” says Niccol, who started his career selling Scope mouthwash at Procter & Gamble and worked for Pizza Hut, before running Taco Bell and then Chipotle. “I was sitting there going like, ‘Well, I know how to do that.’”

Starbucks had become too inwardly focused, he concluded, and lost sight of its customers and the store staff it calls “partners.” The company had built up successful digital and drive-through ordering businesses during the pandemic, but had let that distract it from what defined its brand — providing high-quality coffee, personalized service, and a “third place” between home and work.

“All the things they were talking about — efficiency, supply chain, productivity — all those things are important, but that can’t be where you start,” he says.

Communicating strategic clarity

If Niccol is feeling pressure from investors, he shows little sign of it.

“My point of view is, you need some time to assess the problem. You need some time to then build the plans, and then you need some time to validate what you’re doing. And then, [in] a company our scale, it can’t roll out overnight,” Niccol says. “So is that 12 months, 18 months, 20? Well, I don’t know, but what I do know is we’re working on the right things, and I’m seeing the progress.”

Niccol turned his analysis about the company’s lost sense of direction into a strategy he dubbed “Back to Starbucks,” whose crisp branding he contrasts with his predecessor’s plan, “Triple Shot Reinvention with Two Pumps.” (“I don’t know what that means,” he says.)

Back to Starbucks is shorthand for returning the business to its community coffee house beginnings, with more inviting stores and a less complex menu. It speaks to Niccol’s desire to clarify what the company needs to do through simple, memorable messaging.

“The one thing that I’m most proud of to date is all of our stores know the Back to Starbucks strategy,” he says. “It’s hard to put a price tag on that clarity all the way through the organization.”

He has fleshed the headline strategy out with a more detailed model called “green apron service,” focusing on “five key moments” in store that shape the customer’s experience, from a barista greeting them to handing over a cup with their name written on it. And he has instructed district managers to leave their desks and do a “coffee house walk” to inspect whether an outlet is running as it should be.

The investments in technology, store refits, and additional staffing to give baristas time to connect with customers have added up to hundreds of millions of dollars. They will take time to recoup, but Niccol says they have already driven down staff turnover and reduced customers’ wait times.

He watches closely for signs of consumers cutting back on extras like a shot of caramel in their coffee or a side order of egg bites. But for now, the bigger challenge is handling demand, he says. If people look into a Starbucks and see a long line of customers and no free seats, “that’s when they abandon us.”

“The customer wants you to be good,” he adds. “Expectations are high, and they won’t give up on you. They believe you’ll get it right, and then it’ll be right for them.”

Priorities, pilots, and barista buy-in

Niccol decided that he could not address all of Starbucks’ strategic challenges at once, so he would focus first on fixing its home market.

If the US business is underperforming, he reasoned, international operations would struggle to compensate. “I could tell you our Japan business is firing on all cylinders, and you’d be like, ‘Well, that’s great... What else have you got?’” But if US headlines started to say that Starbucks was back, that would have “a cascading effect on the rest of the world.”

Niccol’s initiatives are now rolling out across the US, but each one was piloted first in just a handful of stores. “We take five coffee houses and say, ‘All right, guys, we’re going to do the coffee house walk, give us feedback. We’re going to do the five key moments, give us feedback. We’re going to add labor, give us feedback,” he says.

Incorporating those responses helps build support throughout the organization. “The idea is the green apron service model was built by baristas,” he says, “It wasn’t built by corporate.”

Barista buy-in matters to Niccol because his predecessors were caught out by a unionization push in its US stores four years ago. The company has yet to agree to a contract with Starbucks Workers United, which says it represents more than 12,000 baristas.

“I don’t see why we can’t end up in a reasonable contract,” Niccol says. But any deal “has to recognize we already have the best job in retail,” with industry-leading benefits. “It’s got to take into consideration the realities of the business,” he says firmly: “I’m hopeful, but …it takes both sides to say they want to get to a contract.”

Pumping up culture with a founder on stage

Starbucks’ culture stands “at a critical point,” he says. “Probably 80% [of employees] have embraced the change, 10% are on the fence, and 10% are resisting it.”

To create more converts, Niccol gathered 14,000 store managers in Las Vegas in June for a three-day “leadership experience.” The heavily caffeinated event, featuring inspirational speakers, a global barista competition, and ​​a cold brew takeover of the Las Vegas Sphere, cost enough to merit a mention in Starbucks’ earnings statement. But Niccol says he saw immediate returns.

“In any transformation, you’ve got to capture the hearts and minds of the front line,” he says, and a shared experience that makes frontline staff feel special can have an outsized impact. “You’ve got to pump them up. You’ve got to get them to believe. And then you’ve got to get them to go back [to their stores] and say, ‘We’re on the right path.’”

Among the speakers was Schultz, who received a rapturous ovation. He hailed Niccol’s strategy and said he had “never been more optimistic” about the company he turned from a Seattle coffee bean seller to a global brand.

The relationship between a founder and his successors can be fraught, and Schultz twice reinstalled himself as CEO when he felt the company had faltered. Niccol, who speaks to Schultz about once a month, began by laying down clear expectations for what their rapport would be.

“Howard reached out, and I told him, ‘Look, I’m here to run the company. My goal is to get Starbucks not a little bit back to where it was, but get it back to its rightful place,’” he recalls. “And to his credit, [Schultz] was like, ‘Yeah, run the company.’”

Any founder will want to offer ideas and suggestions, he adds. “And you know what? Some of them are really good, and some of them, you’re like, ‘That’s not right for today.’”

Competition in China changes menus in Seattle

Niccol describes his goal as creating “the world’s greatest customer service-slash-customer experience company, no matter where you are in the world.”

That means having to resolve a strategic dilemma in China. Its operations there are growing again, but Niccol has concluded that it cannot reach its potential in that market alone, telling investors there is “intense interest” from more than 20 potential partners.

“We have 8,000 stores, and everybody I talk to believes we should have 20,000 or 30,000... That’s a lot of growth,” he says. But he is looking to retain a “meaningful” stake in a joint venture with a locally knowledgeable group to help it reach China’s smaller cities.

The competition with low-priced local rivals such as Luckin and Cotti is only likely to intensify, Niccol says, and he is trying to learn from them while differentiating Starbucks.

“A lot of these competitors right now are only focused on convenience and flavor. We’re going to be able, I think, to out-innovate them on flavor. We can definitely match them on digital. And then we can have a real point of difference on experience,” he says. Where today’s Starbucks menu leans heavily on caramel, vanilla, and chocolate flavors, he sees opportunities to add more banana, coconut, and orange.

Niccol’s own tastes have changed with his career. At Taco Bell, he favored Crunchwraps for lunch. At Chipotle, it was chicken tacos. At Starbucks, lunch is usually one of its bite-sized snacks. On a visit to New York, though, he chooses Sant Ambroeus, an Italian restaurant. When the waiter clears his pasta, Niccol asks for a cappuccino.

“This is market research,” he insists. “I have to drink coffee elsewhere, begrudgingly.”