Starbucks is “close to doubling” its marketing spend as a percentage of revenue, as the coffee chain focuses on “getting back” to what “sets [it] apart” as a brand under the leadership of its new CEO.
Brian Niccol, who took the top job back in September, has pledged to “re-introduce” the brand to the world as a priority in his role.
“Over the past four months, we’ve been focused on getting back to Starbucks and those things that have always set us apart: a welcoming coffee house where people gather and where we serve the finest coffee handcrafted by our skilled baristas,” he told investors yesterday (28 January).
“We believe it’s the fundamental change in strategy we need to solve our underlying issues, restore confidence in our brand and return the business to sustainable long-term growth.”
Writing in Marketing Week in November, Mini MBA professor Mark Ritson heavily criticised Starbucks’ positioning under Niccol’s successive predecessors. He argued there has been a distinct lack of customer-centricity in Starbucks’ “mission statements” and broader positioning.
Starbucks needs to cut the crap from its brand positioning
“Starbucks has never truly known what its appeal is to consumers,” Ritson wrote. “That’s a shame, because if it can cut through the self-inflated bullshit of its silly series of mission statements and get to grips with its actual appeal, the company and its customers could be infinitely better served.”
Earlier this month, Niccol announced a new company mission statement: “To be the premier purveyor of the finest coffee in the world, inspiring and nurturing the human spirit – one person, one cup and one neighbourhood at a time.”
The statement does retain much of what was previously in the company’s mission (added in 2008), but also brings back the brand’s original mission – to be a purveyor of coffee.
Niccol was also clear that what differentiates the brand was the in-store experience and Starbucks’ role as a “welcoming” destination for customers that serves great coffee.
Investing in experiences
In line with its mission of “re-introducing” the brand, Starbucks has stepped up its marketing spend. The firm has rediverted some of what it would have spent on promotional activity and discounting, said Niccol.
“We stepped away from discounting and went into more broad-based marketing efforts to demonstrate the craft of our coffee, as well as the premium experience you get from Starbucks,” he stated.
The brand has made clear it wants to appeal to consumers more broadly and appeal to customers who are not members of its Starbucks Rewards loyalty scheme (which offers discounts) as well as members. In the US alone, the loyalty programne has 34.6 million 90-day active members, up 1% year-on-year.
Starbucks groups investment into discounting and wider advertising and communications. This total figure remained largely flat, but the proportion that went into what Niccol termed “working dollars for the brand” increased.
Chief financial officer Rachel Ruggeri said the company is “close to doubling” marketing spend as a percentage of revenue, and is putting it towards “restoring confidence in [the] brand”.
Niccol flagged a new ad in the US, which depicts the moment when Starbucks baristas write customers’ names on cups. He said the connection between customers and baristas (which Starbucks sometimes calls “partners”) is a “key point of difference” for the brand.
“We’re taking these dollars, allocating it to talk about the brand experience and it’s in such a way where it’s very executable for people to actually experience it through our partners in the stores,” he said.
Reporting its first quarter earnings yesterday, Starbucks saw global comparable store sales decline 4% year-on-year for the three months ending 29 December 2024. Those lower earnings were driven by fewer transactions, although the amount the average consumer spent in a transaction went up.
Despite fewer transactions in the quarter, Ruggeri flagged the company had seen growth in the morning and that the number of customers not registered with its Starbucks Rewards loyalty programme grew quarter-over-quarter. This shows encouraging signs on the company’s transformation plan, she said.
“We’ve seen value as we speak to all of our customers and as we’ve shifted out of discounts into more broad-based marketing that’s helped us reach a broader base of customers, which this quarter – even though we’re early in the turnaround – we saw good signs of progress on,” she said.
