Difficult morning for Starbucks employees. Around 12pm today, February 25th, 1.100 workers of the multinational coffee company have received notification of their dismissal. The measure is part of a corporate reorganization aimed at simplifying the internal structure and improving operational efficiency. The decision, already announced by CEO Brian Niccol in a letter to employees, represents a further step in the company's relaunch strategy, struggling with declining sales and increasingly fierce competition.
The dismissal was remotely managed with a simple message: “Stay home and wait for the email“. According to Financial Times, the company has decided to send home all employees potentially affected by the cuts, asking them to work in smart working for the whole week. In this way, they received the news of the layoff without having to deal with it in the office. Probably, the idea was that it was better to “take the blow” away from the company walls, perhaps with an extra strong coffee in hand, comfortably at home, rather than having to manage everything directly at the office.
The restructuring plan
I layoffs concern Corporate staff only and not the employees who work in the stores. Starbucks employs about 16.000 employees in the administrative and management sector, and this measure will affect them approximately 7%. Niccol's declared objective is to eliminate duplication of roles, reduce organizational complexity, and create more agile, accountable teams.
“We are simplifying our structure, removing layers and duplication, and creating smaller, more agile teams. Our intent is to operate more efficiently, increase accountability, reduce complexity, and foster better integration,” Niccol wrote in his letter.
Starbucks's difficulties
In recent years, Starbucks has faced economic challenges important. The global sales of the company are decreased by 2% in fiscal year 2024, with demand declining in both the US and China, the brand's two largest markets. In the US, customers have become increasingly impatient with price increases and long wait times in stores. Meanwhile, in China, Starbucks has seen growing competition from cheaper local chains, putting at risk its dominant position in the market.
Another factor that weighed on the company's finances was theincrease in the price of coffee. At the end of 2024, the cost of coffee reached its highest level since 1977, reaching $3,35 per ounce. This increase had a direct impact on the company's profit margins, making a cost review necessary.
Niccol's strategy for the relaunch
Brian Nicol, appointed CEO of Starbucks last September, is known for having successfully relaunched the fast food chain Chipotle Mexican Grill. The his strategy for Starbucks is based on a back to the brand's core principles: transforming stores into real meeting places for the community and improving the customer experience.
Among the main actions undertaken, Niccol has decided to review the menu, eliminating some less popular drinks, including several Frappuccinos and white hot chocolate. It also introduced a new system for optimize order management, with the aim of reducing waiting times, especially during rush hour, one of the critical issues reported by customers in recent months.
Another change also concerns the premises access policy. From February 3rd, Starbucks has introduced new rules in 11.000 coffee shops in North America: it will no longer be possible to enter the premises to shelter from the cold, rest, use the bathroom or charge your cell phone without making a purchase. The same restriction applies to free water, with the cancellation of the courtesy “free water” policy.
The market reaction
Despite layoffs and financial difficulties, the market seems to have confidence in Niccol's plan. Since the announcement of his appointment, the Starbucks stock have recorded a strong rise, going from the lows of 72 dollars to the current 113 dollars. Investors see the new CEO's strategy as a concrete possibility of relaunch, although it remains to be seen how the company will balance cost cutting with the need to maintain a high level of quality and service.
