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Starbucks' chief executive, Brian Niccol, has a novel plan to turn around slumping sales: Hire more people and use less technology.
In a recent investor call, the CEO outlined future plans after another disappointing earnings report, published on Wednesday. The coffee giant’s share price tumbled 6.5% last quarter.
Previous optimism that replacing staff with more technology could drive improved financial performance “wasn't an accurate assumption,” Niccol told investors.
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Sales at the coffee chain fell for the fifth consecutive quarter.
But while other retailers and food & drink companies attempt to manage rising costs and falling customer spending by reducing headcount costs with more in-store tech, Starbucks is shaking up its approach to automation.
Previous attempts to curb Starbucks’ slumping financial performance, started by former chief exec Laxman Narasimhan, included cuts to the number of baristas in its stores.
Niccol said the approach has not delivered the results Starbucks hoped.
“Over the last couple of years, we've actually been removing labor from the stores. I think with the hope that equipment could offset the removal of the labor,” he reflected. “What we're finding is... that wasn't an accurate assumption with what played out.”
Starbucks began to test increasing headcount in a small number of stores in September 2024, with Niccol now expanding the recruitment drive to approximately 3,000 stores this year.
The chief exec conceded that more baristas wouldn’t come cheap, but said he was “banking on some growth to come with the investment.”
“We believe this evolved, labor-focused approach has more potential to improve throughput and connection while minimizing future capital expenditures on equipment,” he explained.
Starbucks also said it will, in part, offset the costs by pulling back the rollout of its ‘Siren Craft System,’ a suite of technology, equipment, and tools initially deployed in 2022 to optimize the drink-making process.
Why are Starbucks’ anti-automation hiring plans so noteworthy?
The move to expand hiring efforts and scale back hiring differs from other notable stories of businesses replacing headcount through augmentation, such as e-commerce platform Shopify, whose CEO, Tobi Lutke, recently ordered staff to prove they “cannot get what they want done using AI” before asking for extra hires.
Buy now, pay later platform Klarna has taken a similar approach, after CEO Sebastian Siemiatkowski announced plans to drop the company’s headcount by half, around 2,000 employees, through the greater use of AI tools.
Many food and beverage retailers, such as KFC, Taco Bell, Pizza Hut, and Wendy’s, have also explored automation technology to improve processes and lower costs, including AI-enabled drive-thru ordering and chatbots to handle customer queries.
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However, attempts to replace food & beverage employees through automation have not always proved successful.
Last year, McDonald’s confirmed it would no longer use AI chatbots to take customer orders at drive-thrus, having tested the technology at over 100 locations across the US.
Hiring plans follow historic corporate job cuts
Only two months ago, in February, the coffee chain announced the largest layoffs in its history, with plans to slash 1,100 corporate jobs.
Niccol told staff that the restructuring would help the business “operate more efficiently, increase accountability, reduce complexity, and drive better integration.”
The cuts did not impact warehouse, roasting, or in-store employees.
Plans for extra hires are the latest move from Niccol to impact Starbucks’ in-store workforce, after baristas were recently told they would need to comply with a stricter dress code from May.
Store workers will no longer be allowed to wear any color of top and must instead wear “any solid black short and long-sleeved crewneck, collared, or button-up shirts and any shade of khaki, black, or blue denim bottoms.”
A statement from Starbucks said the updated dress code would “deliver a more consistent coffeehouse experience that will also bring simpler and clearer guidance to our partners, which means they can focus on what matters most, crafting great beverages and fostering connections with customers.”
Staff were less thrilled about the “clearer guidance,” with union workers rallying against the new uniform requirements.
