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Sep 24, 2018

Starbucks plans 'significant changes' to organizational structure; layoffs expected

An employee poses with a cup of water at a Starbucks in Austin, Texas

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Starbucks Corp. (SBUX.O) is planning an organizational shake-up, including corporate layoffs that will start at top levels, as the coffee chain tries to reverse stagnant sales and rekindle investors’ interest.

“We must increase the velocity of innovation that is relevant to our customers, inspires our partners, and is meaningful to our business,” Chief Executive Officer Kevin Johnson said in a memo to employees viewed by Bloomberg News. “To accomplish this, we are going to make some significant changes to how we work as leaders in all areas of the company.”

The leadership and organizational changes will begin this week and carry on into November, Johnson said. He sent the email after the company held its quarterly town hall meeting in Seattle last week. Starbucks employed about 10,000 in U.S. support facilities, store development, and roasting, manufacturing, warehousing and distribution operations, as of Oct. 1, 2017.

Contacted by Bloomberg News, a spokeswoman said the changes will entail an undetermined number of layoffs and include some employee shifts between company departments.

The coffee behemoth, now one of the world’s largest restaurant companies, is fighting back against fast-growing regional chains as demand wanes for its signature Frappuccinos. To counter this, Starbucks wants to speed the arrival of new menu items at its more than 28,000 cafes. It’s also pushing innovation in other areas including automating its back-of-store inventory system to reduce waste and let staff spend more time with customers.

New Items

Starbucks in June added a strawberry Frappuccino and chorizo sous vide egg bites to its permanent menu. It has also added a non-dairy, plant-based cold brew drink made with almond butter. To boost afternoon traffic, the company has expanded its line of grab-and-go salads and sandwiches.

Starbucks is testing delivery, too. The chain earlier this month began working with UberEats in more than 100 locations in the Miami area. It’s also teamed up with Alibaba to offer the service in its quickly growing Chinese market this year.

The company said in July that comparable sales increased just 1 per cent in its latest quarter -- far short of the rapid growth to which investors have become accustomed. Starbucks shares have been stagnant this year, compared with an 18 per cent gain for the S&P 500 Consumer Discretionary Index over the same period.

“We have opportunities to better prioritize and move faster,” Johnson said. “We must knock down the barriers in our decision making.”