Brian Niccol (2:03)

That's right. So, you know, we saw about a little less than a point of ticket growth and that's really driven by the fact that we've launched this new program around protein. So you get a protein cold foam on any drink and that's a modification. And then obviously the balance of the growth came from just more people coming to Starbucks either more often or coming back to the brand that hadn't been.

Bloomberg Interviewer (2:27)

Here in A while since you took over, you've put a big emphasis on, I guess reimagining the stores to a certain extent. This may seem like a dumb question, but why? I mean when I look at where your revenue comes from, a lot of that is coming from the drive thru, it's coming from takeout on the apps, it's coming from delivery. But you put a big emphasis on the in store experience and I don't understand why.

Brian Niccol (2:46)

Yeah, sure. Well thanks for the question. Because I do believe Starbucks is defined by the cafe and the coffeehouse experience. That really is where you get the human to human connection with our baristas. It's where you see the craft of Starbucks and then you also get just the soul of Starbucks. So you know, our in store business is still over 20%. The thing that I always like to remind people too is people access Starbucks in all these channels. So they may go via the drive thru or mobile order Monday through Friday, but Saturday, when they've got a little bit more time to dwell, they want to hang out in a great space. And so just this past month the data I saw is 60% of our customers made at least one purchase from the counter. And that doesn't include our mobile order pickup people that come into the store to pick up their coffee or their drink or their food. So you know, obviously the entire business works because we have the right access modes, right mobile order, pickup, delivery, drive thru and then obviously the Yin Cafe. But I just believe the cafe experience and this idea of a community location the third place, it's critical to people and it's critical to what makes Starbucks Starbucks. It's who we are.

Bloomberg Interviewer (3:55)

And you think that's what customers want because we've seen some new entrants into the coffee space, both domestically as well as some folks like Luckin coming to the US taking a much different business model, basically grab and go more or less.

Brian Niccol (4:07)

The thing I like to remind everybody is we actually execute those channels, right? So we have a mobile order pickup business which is one of the competitors. We have the biggest drive thru business. It's a, it's well over a $10 billion business. It actually would be a Fortune 500 company just on its own. So we know how to operate and give great experiences in all access modes. What we've seen over and over again though is when we have all these channels with a great coffee house, we really are unmatched. And so that's our point of difference. And that's not to say we can't be great in These other access modes and compete effectively.

Bloomberg Interviewer (4:42)

I mean, that sounds great on paper, but that sounds also complex. I mean, how do you maintain the integrity of everything when you're trying to have this experience in store at the same time, somebody who wants to grab and go or a delivery driver showing up to grab an order as well.

Brian Niccol (4:55)

And that is why it's so important that we get this green apron service model dialed in. And really at the foundation was making sure we have the right number of people on the roster. The people are deployed correctly. Our partners then know what they're accountable to execute. And what we've been able to see is between technology and I think, simplification of the actual operating model, our partners can do a great job. A cafe experience happens in less than four minutes from order to drink with a personal handoff mobile order. We're more on time and accurate than we ever have been. And our drive thru during peaks are below four minutes as well. So it can be done, but we have to be intentional about it. And you know, we have to set our partners up to be successful to operate that Omni Channel experience. So, you know, I love the fact that we're seeing the success that we're seeing and I love that, you know, people are talking about the Starbucks experience again, like that shine that soul, that really is magnetic, that vibe.

Bloomberg Interviewer (5:55)

I think one of your executives said yesterday at your investor day is back.

Brian Niccol (5:57)

Yeah, yeah.

Bloomberg Interviewer (5:58)

The cultural relevancy for Starbucks. That's back.

Brian Niccol (6:00)

That's back as well. Our mark marketing, our menu innovation, one of the things we set out to do as part of this turnaround is get back into culture, get back to leading culture. And you know, you got to do that with the right drinks, the right food, and then frankly, the right representation of the brand, showing up in the right places at the right time with the right communication. And Tracy Lieberman, who leads our marketing efforts, she's done a phenomenal job. We are, in my opinion, Starbucks is back.

Bloomberg Interviewer (6:28)

Well, speaking of her, your investor day yesterday, she talked a lot about your rewards program. It's relaunching, being reimagined, I believe in early March. Talk about the need to retain your existing customer base, but how that rewards program helps, if at all, in bringing in new customers, those who aren't exposed to Starbucks on a daily basis.

Brian Niccol (6:47)

So look, we got a lot of feedback on the rewards program. It's been a great program, but the feedback we got was it's not very personalized. And so really what the team has done is made it more personal and the feedback we get from people that don't participate is like, look, you know, maybe I don't go to Starbucks with enough frequency to really benefit from the rewards program. We're changing that because now when you get into the green tier and there's three tiers now, so you're going to have the reserve tier, the gold tier and the green tier.

Bloomberg Interviewer (7:15)

Reserve is the top.

Brian Niccol (7:16)

Reserve would be the top. You know, you'll actually get a black reserve Starbucks card.

Bloomberg Interviewer (7:20)

Okay.

Brian Niccol (7:21)

Which know will be pretty cool because everything seems to be so virtual anymore. I think people like every once in a while to get something tangible. But the green tier then allows you to redeem stars and you can get, you know, a reward with not that much engagement. And so it just gets people to be more connected to the brand. And then ideally over time, you know, they'll migrate into gold or you know, for some of those folks that migrate into reserve, I think they'll find it's a really special experience.

Bloomberg Interviewer (7:48)

You've managed to sort of get sales back up. There are still some analysts that look at some, some of the growth rate that you have, 4% I think was in the most recent quarter. I think your guidance is what, 3 to 5% a little bit longer term. But there are some analysts, they're looking back to the heyday from a decade or two ago when Starbucks was more mid single digits and even up into the teens. Is that even realistic to get back to those levels?

Brian Niccol (8:09)

Look, I've looked at, I've looked at this as I've come in and a company at our scale, you know, we have 40,000 coffeehouses around the world, over 400,000 coffee Green Apron partners. I think if we can consistently deliver a comp that is 3% or better, you know, revenue growth that is, you know, 5% or better and then earnings growth that outpaces that, that would be world class. And we're a world class company and we will deliver, I think, world class results as we get going on this turnaround. So make no mistake, we are a growth company at scale, which is really exciting, I think on the top line.

Bloomberg Interviewer (8:47)

When does the bottom line catch up?

Brian Niccol (8:48)

So the bottom line will start, you'll start to see us make improvements, I think as we get into the back half of this year and then every year from here on out. And that's really what we guided people towards is we'll get into the 13 to 15% range on margins here by 2028. And then actually that's just, I think a mile marker. There's Opportunity for us to grow even beyond that.

Bloomberg Interviewer (9:10)

What's, what's holding back that margin expansion, that profitability right now.

Brian Niccol (9:14)

You know, look, initially we had to do some reinvesting in the business to get again the right people. We invested over, I think it's 500 million, close to $600 million into the labor experience. And you know, the best way for you to then start driving earnings is we got to get the top line going. We've done that. And then obviously we'll work on the middle of the PNL as well on the cost side of things, which we've got clear line of sight on how over the next two years we'll probably be able to save close to $2 billion while we're growing the top line. So it's, it's a, it's a combination of growth and smart cost management.

Bloomberg Interviewer (9:53)

I am curious, at least here in the US with regards to those growth plans, how much have you taken into account the economic environment? I mean, a lot of your products are still, if not premium, certainly perceived as premium priced products here. Does that work against you if we do end up in an economic downturn?

Brian Niccol (10:08)

You know, look, I think at the end of the day, the thing that I'm excited about is people are saying the experience they're getting at Starbucks, the whole package, they're saying it's worth it. And we're hearing, we're seeing some of our highest scores through consumer claimed statements. And that's why I think it's so important that we have this great cafe experience, we have this great customer experience where it's a connection between our barista and then look, we've always been unwavering in the quality of our coffee, our drinks and the ingredients that we use. So yeah, you know, we're going to be an affordable luxury item. But if you look at it, we're priced pretty darn competitively. And then I think for what you get, for the premium that we provide, I think customers are saying, yeah, you know, I'm all in on that.

Bloomberg Interviewer (10:55)

Do you think you have that pricing power right now should you feel like you need to pull that lever?

Brian Niccol (10:59)

You know, look, pricing is one of those things that will always be the last lever that will pull. There are times where you do have to put some pricing into the business, you know, but fortunately we've been able to hold off for the last little more than a year. So we'll see how things evolve. But you know, if we need to do it, we'll do it very strategically and we'll Try to do it as minimal as possible.

Bloomberg Interviewer (11:23)

You're spending a lot to revamp your stores. I know that's a temporary cost in theory, but there are other additional costs you're having to deal with, including labor costs and things that are going to be a lot more longer term and permanent. How is that factored into the forecast?

Brian Niccol (11:36)

Yeah, you know, look, obviously you always have to think through what does it cost in order to make sure we maintain the integrity of the experience. And right now we're having to come back in. We call it our coffeehouse uplift program, where we are just basically re touching all of our cafes. So we want to have great seats, great atmosphere, a place that feels warm, place you want, a place you want to be. And then obviously we have been and will always be some of the best benefits, best wages you can find as a, as a partner. And so when you look at it in retail, there's no doubt we have one of the best jobs in retail. You know, and that's the reason we can also see it is we have the lowest turnover in our industry by a, by a lot. Our turnover is below 50% at the hourly level. In this industry, turnover is usually over 125%. So we're definitely doing something right. And the feedback I'm getting from our partners is. And they definitely feel supported. They're engaged and they love doing the work that they're doing.

Bloomberg Interviewer (12:35)

I am curious, though, about some of the unionization drives that kind of predated you, but obviously still there as well. Have you spoken with those unions in any sort of meaningful way recently? Are they still demanding more than what you've already offered?

Brian Niccol (12:49)

You know, look, I think we've talked about this. I'd love to be able to find a deal so that we could, you know, get a contract and move on. But it's going to have to be reasonable and it's going to have to reflect the fact that we are the leader in benefits, wages for people that work 20 hours or more in our company because it has to be sustainable so that all 400,000 partners and all 250,000 partners in the United States can continue to have a great experience, a great career, and, you know, frankly get great development and growth, personally and professionally. So, you know, we're always going to continue to have the conversation. And, you know, I'm, I'm a believer in that you can find a solution, but it's going to have to be reasonable so that everybody can be successful long term.

Bloomberg Interviewer (13:35)

The US is obviously your primary market But Starbucks, for quite some time and made a real big push into China. At one point, you were the largest coffee chain in China. You've retrenched from that just a little bit, and you've recently entered into a partnership to effectively sell off the majority of that business to the private equity firm. Boy, you. What is Starbucks going to look like, particularly in China and the rest of the. And the rest of the countries?

Brian Niccol (13:56)

Yeah, look, I think the one thing I want to be clear on is we do believe China is a tremendous growth market. You know, today we have over 8,000 coffeehouses. We believe with our partner, Bo you, that could be 15, 20,000 coffeehouses. And they are the great. They are a great partner for growth. And part of the reason why we decided to do this is for our next chapter of growth. We just believe we needed a local partner to help us kind of figure out how we can grow faster. Because one of the things that has really, I think, been exciting to see and on the other hand, kind of like, whoa, is the coffee category is really growing. And, you know, some of these competitors that have emerged in China have just, I think, really ramped up their new unit growth. And so we're going to have to get more competitive in our new unit growth story. And I still believe at the end of the day, we have the best product and the best experience. So I believe that'll set us up for success. And I think that's why Beau is so excited to partner with us, because they see the opportunity as well.

Bloomberg Interviewer (14:56)

You talked at your investor day about this being sort of an asset light model that you're taking there. Does that also mean that investors should expect maybe slimmer margins because of the fact that you have to share a lot of that money with.

Brian Niccol (15:09)

Boy, no. You know, and look, the way we've structured it is obviously the partnerships are, in the cases where we have full license scenario, we don't end up deploying our capital into the markets. We support the licensee in a different fashion through, you know, marketing and menu and technology and, you know, design. So it just becomes less of a requirement on our capital. But it's still, you know, in most cases, you see the margin actually rise and becomes margin accretive to the total business. And the thing is really exciting is there's so much opportunity for growth. And when you have these local partners in these international markets, we just end up, I think, getting access to the premier real estate and at a speed that we couldn't do from, you know, our Seattle offices.

Bloomberg Interviewer (15:56)

I am curious about the scale of this business, particularly in light of some of the businesses that you ran before relatively successfully. For those who don't know, a former brand manager at P and G, you went on, turned around Taco Bell, you turned around Chipotle. Now you're just Starbucks. Is Starbucks too big to handle right now?

Brian Niccol (16:11)

Oh, no. The thing that's great about Starbucks is the brand is beloved, it's iconic. And when you go around the world, there's no doubt that people want to engage with the Starbucks brand. As I was looking at the U.S. i think we just moved too far away from what made Starbucks Starbucks. And I think you were at our investor day yesterday, and I think Mike said it really well, which is we don't need to change who we are. We just need to be great at who we are and what we do. And that's what we're getting back to doing intentionally. Right. So it's like we're going to be intentional about that barista to customer interaction, the customer experience you get. We're going to be intentional about making sure you have a great seat. We're going to be intentional with the menu, the marketing, the digital experiences that we provide. And what I've seen just most recently from this quarter is when we do that with excellence.

Bloomberg Interviewer (16:57)

Yeah.

Brian Niccol (16:57)

You know, we get rewarded with customers, business and loyalty.

Bloomberg Interviewer (17:00)

And you're going to be intentional about the locations. I mean, under your predecessors, there was a big expansion plan where at least here in New York City, I mean, you can walk down a single block and have like five Starbucks, you know, all competing against each other. That's retrenched a lot. Do you go back to that?

Brian Niccol (17:13)

Well, look, I think there are opportunities for us to continue to grow in New York City and frankly, in a lot of communities around the United States. We talked about this yesterday. We believe we can add 5,000 stores. We've got line of sight on that. And as we grow our afternoon day part and grow, the economics of the business will probably go well beyond those 5,000 that we've identified. So you'll see Starbucks continuing to bring new stores. We want to be smart about where we locate them so that it's the right place for the customer, most importantly, and then also so that we can, you know, attract and retain partners to have a great experience working in the stores.

Bloomberg Interviewer (17:50)

Most of your revenue is still weighted to the morning. You mentioned the pm, if you will, afternoon. What actually gets people not only in the stores in the afternoon hours, but also spending more.

Brian Niccol (18:00)

Yeah, well, so we have an afternoon business today. But I think there is a multibillion dollar opportunity to grow our afternoon day part, you know, as we get the cafe set up to be a great place for you to, you know, kind of reset, recharge, whatever you want to do. And we pair that up with the right beverage and ultimately the right food. I think there's no reason why we can't have as strong of an afternoon day part as we have in the morning.

Bloomberg Interviewer (18:26)

And speaking of food, you are making some major menu changes. One thing I noticed at the investor day, there were a lot of non caffeinated beverages now that are coming down the menu. Why?

Brian Niccol (18:37)

Well, I think we were sampling a lot of the things that we think are going to be right for the afternoon. And you know, we talked about our new energy refresher platform where you'll be able to do, you know, completely decaffeinated to what is our standard caffeination and then add a little bit more and you'll be able to customize this. So, you know, we want to have the right drinks for you whether it's morning or afternoon. And what we're seeing is in the afternoon, some people in certain cases aren't looking for caffeine. In other cases they're actually looking for more caffeine. So we need to be able to provide it all. And the thing that I love about Starbucks is personalization, slash customization is at the core of who we are and what we do. So I'm really optimistic about what we can do with food and what we can do with beverages to be on trend. Right? Protein, fiber forward on the food side of things and then on the beverage side of things, giving you that personalization so that you can get the flavor experience that you want with the energy experience that you want.

Bloomberg Interviewer (19:34)

No olive oil, Not.

Brian Niccol (19:36)

Not right now.

Bloomberg Interviewer (19:37)

All right. You know, Brian, you've done a good job so far and you know, investors are going to demand a lot more. Done a great job turning around other companies. I just have to end this by asking you a really hard question here. Oh, univers Miami university guys are 21 and oh, first time you guys have really kind of been contenders since the Wally Serbia area. Is this going to be that year where you guys get back to the, to the ncaa?

Brian Niccol (20:00)

You know, look, it is as an, as an alum of Miami of Ohio, it is great to see the success team is having and Coach Steele is having. Yeah, you know, I was at Miami. I graduated in 96. So after I graduated we had that great run with Wally Zerbiak. And it was fun to see they got to the Sweet 16. It's fun to see the students having a great time and it's fun to see the school on the national stage. It's a great school. I've got great friends, great memories. So it's fun to see them having success. And I'll tell you what, I'm watching every game and rooting really hard.

Bloomberg Interviewer (20:32)

All right, Brian, we really appreciate you being with us here. A turnaround going on right now at the Miami University and a turnaround at Starbucks.

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