How is Starbucks planning to cut $3b in cost?

The company announced its new long-term growth strategy called Triple Shot Reinvention.

Starbucks recently announced its new long-term growth strategy called Triple Shot Reinvention with Two Pumps which could see the brand generate $3b in savings over three years.

The brand said the strategy will build on the significant business momentum from the past year, whilst laying out a roadmap for how the company will deliver long-term, sustainable growth and outsized returns to partners, customers, and shareholders.  

The plan has three priorities namely elevating the brand, strengthening and scaling digital and becoming truly global. Starbucks said these strategies will be customised with ‘two enabling pumps’ called—unlock efficiency and reinvigorate the partner culture.

For brand elevation, Starbucks plans to expand its store formats doubling down on drive-thrus and delivery-only formats. The brand will also focus on customisation and personalisation of the core menu which accounts for 85% of its net beverage sales. Additionally, Starbucks will look into concentrating on specific dayparts and expanded menu offerings including all-day breakfast and all-day snacks.

Meanwhile, for digital capabilities, the coffee giant is planning to focus on growing its reward programme members with an additional 75 million, focusing on the most frequent customers over the next five years. In tandem with personalization efforts, Starbucks is revamping its technology infrastructure, accelerating the introduction of new features, and enhancing its Deep Brew platform capabilities. 

The company is also venturing into three notable technology collaborations to elevate the customer and partner experience. These collaborations include partnering with Microsoft to harness generative AI capabilities for product development and personalization, teaming up with Apple products in an innovative store to refine technology for global partner assistance, and reimagining the in-store customer experience through Amazon One and Just Walk Out technology. Starbucks is determined to lead in the digital sphere and elevate customer engagement on a global scale.

Cutting down costs

Starbucks is also launching the initiation of a substantial $3b efficiency program, with $2b earmarked for cost savings outside the store, particularly in the cost of goods sold. The primary objectives of this program are twofold: to reinvest in the business and to provide shareholders with returns through progressive margin expansion and earnings growth.

For FY 2024, Starbucks expects a global comparable store sales growth projected to be in the range of 5%-7%. Revenue growth is anticipated to be at the lower end of the 10%-12% range, and earnings growth is expected to fall within the range of 15%-20%.