Will Starbucks’ big bet on its baristas pay off?

{"text":[[{"start":7.78,"text":"Starbucks is planning to hire more baristas, in a costly gambit to re-establish a personal connection with customers put off by long queues and poor service."}],[{"start":18.18,"text":"Brian Niccol, chief executive, on Wednesday promised an arena full of 14,000 store managers in Las Vegas that “the biggest human capital investment in connection in the history of Starbucks is about to happen”. His pledge was endorsed on stage by Howard Schultz, the revered former chief who built Starbucks into the world’s biggest coffee shop chain."}],[{"start":43.26,"text":"Niccol was hired last year to turn around the company after a sharp decline in sales. He has christened his strategy “Back to Starbucks”, embracing Schultz’s original vision for shops to serve as a “third place” between home and work."}],[{"start":60.11,"text":"In Niccol’s view, one fix lies in hiring more workers. The average store employed 23 people five years ago, versus 18-19 today, said Mike Grams, chief operating officer. He told North American managers that they can start adding employees starting in August. “Your rosters are going to expand with this.”"}],[{"start":84.14,"text":"Managers cheered when Grams announced the extra hands, but Wall Street has been nervous about the cost. The full introduction of what Starbucks is calling its Green Apron Service model would “drive further pressure” on its earnings, TD Cowen said."}],[{"start":null,"text":"

"}],[{"start":100.39,"text":"Starbucks’ manager meeting, the first since 2019, articulated new plans but also served as a rally for employees frustrated by the company’s recent misfortunes. Baristas have complained of stress from juggling orders during busy shifts."}],[{"start":118.83,"text":"The company is also in protracted contract talks with Workers United, which is representing about 600 of its US stores. The union derided the Leadership Experience 2025 event as a “waste of money”."}],[{"start":133.56,"text":"In the University of Nevada-Las Vegas arena, thousands of employees danced to a rap song about frappuccinos and cappuccinos, sampled a new roast in the largest coffee tasting in company history and watched colleagues from Jordan, China and Japan make latte art in the final round of a global barista championship. They were energised by more than 5,000 gallons of coffee consumed at the event."}],[{"start":163.99,"text":"The aim of the Green Apron Service is warm, kind interactions with customers. Apart from new hires, the service will use algorithms to better sort out mobile, drive-through and counter orders. All of the more than 11,000 company-operated stores in North America would have the service in place by the end of the summer, Niccol said."}],[{"start":null,"text":""}],[{"start":187.24,"text":"Starting in September, Starbucks will also add a full-time assistant store manager in most of its US locations to aid head managers who are often stretched overseeing stores that average $2mn in sales a year. Managers gave chief partner officer Sara Kelly a standing ovation when she announced the plan."}],[{"start":210.57,"text":"Under Schultz, Starbucks had introduced a high-tech system to make its coffee bars more like assembly lines with equipment called the Siren Craft System. The equipment costs about $500,000 per store, according to an estimate from Danilo Gargiulo, a restaurant senior analyst at Bernstein."}],[{"start":231.54999999999998,"text":"In April, Niccol paused the rollout of parts of the system."}],[{"start":235.98999999999998,"text":"“We over-rotated on the idea of equipment and that replacing the humanity of service,” Niccol told the Financial Times in an interview. “And I think service is our point of difference.”"}],[{"start":247.71999999999997,"text":"Even before this week’s announcements in Las Vegas, Wall Street was assessing the costs of investing more in human capital."}],[{"start":256.46999999999997,"text":"Gargiulo estimated Starbucks’ North American labour costs would rise from $7.3bn in 2024 to $9.6bn next year and $10.2bn in 2027. “One of the key concerns for investors was what does the rollout of the new labour model mean for Starbucks North America store unit economics,” he wrote in a note."}],[{"start":null,"text":""}],[{"start":285.75,"text":"Moody’s has given Starbucks’ investment-grade rated bonds a “negative outlook”, citing “increased labour investments made as part of its ‘Back to Starbucks’ reinvention plan”."}],[{"start":297.9,"text":"Jodi Love, a portfolio manager at T Rowe Price, a Starbucks shareholder, estimated the labour investments would add more than $1bn in spending to fiscal 2026, but she believed it would be worth the cost."}],[{"start":313.08,"text":"“I think it’s going to be fairly substantial, but I think that’s the right thing to do for the business,” she said. Starbucks shares have risen 6.4 per cent this week, signalling investor confidence."}],[{"start":325.96,"text":"The rise of mobile and drive-through orders along with lives lived online raises questions about the role of coffeehouses as a “third place” where people find community. Niccol said he was convinced Starbucks can be that place if the coffee is good, served quickly by a welcoming barista and sold in a clean, inviting store."}],[{"start":349.04999999999995,"text":"“Despite everybody saying they’re more connected than ever, everything I read is people feel more lonely than ever,” Niccol said. “I think part of the problem is there aren’t enough third places anymore.”"}],[{"start":362.99999999999994,"text":"Schultz agreed in his first public appearance with Niccol as CEO."}],[{"start":368.03999999999996,"text":"“We’re not a company based on technology. That enables us,” Schultz said. “We’re a company based on people.”"}],[{"start":383.82,"text":""}]],"url":"https://audio.ftmailbox.cn/album/a_1749776120_6403.mp3"}