Starbucks projects profit growth from tech, new stores, workers spending

Starbucks projects profits to grow between 15 percent to 20 percent per share over the next three years, a significant increase from previous guidance based on spending plans of US$2.5 billion (S$3.5 billion) to US$3 billion over the same period on technology, new stores and renovations, the coffee chain said on Tuesday.

The company is introducing technology to speed up production of its increasingly popular cold beverages and send digital orders away from busy locations as it seeks to prevent its US cafes from being overwhelmed by orders and improve working conditions for employees, it announced during its Investor Day event.

The Seattle-based company expects to return US$20 billion to investors through share buybacks and dividends from fiscal 2023 to 2025.

A surge in digital orders, which now make up nearly a quarter of all orders, has helped the coffee chain gain market share during the Covid-19 pandemic but has also led to barista burnout and strained the physical capacity at older stores.

The company is exploring “load balancing” technology that can send orders to stores that have capacity to actually fulfill them; instead of to stores already being slammed by drive-through customers, for instance, chief technology officer Deb Hall Lefevre said.

The pandemic changed customer behavior, leading to a deluge of mobile, delivery and drive-through orders, as well as an increase in cold beverages and customized coffee drinks.

Calling it a “reinvention,” the company laid out a sweeping plan spearheaded by interim chief executive Howard Schultz, who will be replaced by Laxman Narasimhan in April next year.

The plan includes new equipment to heat food faster with less plastic waste, new store designs with larger shelves for orders and additional employee benefits.

A new system for iced coffee drinks shaves nearly a minute off the time it takes to make a mocha frappuccino, down to 35 seconds.

Baristas would no longer need to haul a bucket of ice to the station every hour because the ice will be automatically fed into the new equipment.

Another machine, which brews hot coffee one cup at a time instead of in bulk batches and eliminates paper filters, is being tested in Minneapolis locations and could be rolled out next year.

Starbucks is on pace to reach 45,000 stores by the end of fiscal 2025, or nearly eight new stores per day, it said. That includes a net new 2,000 new US stores and some delivery-only locations.

Employees at 236 stores voted to join a union over the past year, out of Starbucks’ nearly 9,000 corporate-owned US locations. Conversely, 52 stores voted against unionizing, according to National Labour Relations Board data.

Union members have been holding protests this week to bring attention to their demands.

Billie Adeosun, a Starbucks employee since 2015 who works at a unionized location in Olympia, said on Monday that higher wages are a top priority. The company has lifted pay to an average of nearly US$17 across non-unionized US locations.

Starbucks says the law prohibits it from offering increased benefits to unionized workers without bargaining over them.

 

SOURCE: NEWS AGENCIES