Starbucks is changing its menu dramatically, and several beverages will be discontinued by the end of next week.
The coffee giant announced Monday that it will be removing a number of drinks starting on Tuesday, March 4. These include several blended Frappuccino types, the Royal English Breakfast Latte and the White Hot Chocolate.
Starbucks stated that these items are not commonly purchased, are difficult to make or are similar to drinks on the menu.
The company said that by streamlining its offerings, it would reduce wait times, improve consistency and “make room for innovation.”
Starbucks has assured its customers that seasonal and new drinks will continue to be offered.
The company has recently launched the Cortado drink and plans to launch an “Iced Cherry Chai”, this spring.
Starbucks to lay off 1,100 corporate workers
Starbucks is also undergoing a wider corporate restructuring in addition to its menu revamp.
This week, the company will layoff 1,100 corporate workers worldwide.
The job cuts were primarily attributed to the need for greater operational efficiency by CEO Brian Niccol who took over the company in August 2024.
Niccol was hired to revitalize Starbucks amid declining demand on key markets like the US and China where inflation has affected consumer spending.
What is the current SBUX status?
Since Niccol was appointed, Starbucks stock has increased by nearly 20% as investors have shown confidence in his leadership.
The share price reached a new 52 week high on Tuesday. It reached $115.08, pushing the market capitalization of the coffee giant to $130 billion.
Evercore ISI reaffirmed their Outperform rating for Starbucks after the announcement of layoffs. They set a price target at $120.
According to Evercore ISI Starbucks’ corporate general expenses and administrative costs stood at $1.8 billion for fiscal 2024 compared to an operating profit of $5.4 billion.
The firm estimates a 3% decrease in corporate overhead costs can lead to an increase of 1% in total operating income.
Niccol has made some major changes since he took over in September. ICD has a look at:
Reversing open-door policy
Niccol’s reversal on Starbucks’ policy of open doors has been one of his most controversial moves.
In January, he said that only paying customers could sit in the store or use the bathrooms.
This was a change from the company’s 2018 policy that allowed anyone to enter Starbucks stores. The decision was made after public backlash following the arrest of two Black Men in a Philadelphia-area store.
Starbucks employees have reported safety issues and difficulties enforcing policies.
Niccol described the reversal of the switch as a necessary measure to ensure customer and employee comfort.
Return of ceramic mugs and condiment bars
Starbucks reintroduced its condiment bars in an effort to restore the traditional cafe experience. Customers can now customize their drinks by adding milk, creamer and sweeteners.
Also, those who order drinks “for here” now receive them in glassware or ceramic mugs.
Starbucks’ spokesperson said that the cafes will be re-branded as warm, welcoming coffeehouses by offering customers their beverages in glassware and ceramic mugs.
The move also aims to reduce waste and promote sustainability.
Elimination of dairy alternative surcharges
Starbucks also eliminated the additional charge for non-dairy drinks, a change which took effect on November 7th.
According to the company’s statistics, the second most popular customization is substituting non-dairy products such as soy, oat or almond milk, or coconut milk.
The most popular customization is adding a shot or two of espresso to handcrafted drinks.
This change will take effect on November 7 and almost half of Starbucks customers in the US that pay to modify their beverage in company-operated shops will see a reduction of more 10%.
In certain markets, customers used to pay up to 80 cents more for non-dairy products.
This post How does SBUX stock perform as Starbucks cuts menu and lays off 1,100 corporate workers? This post may be updated as new information becomes available
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