Back to Starbucks Plan Looks Cogent but Requires Costly Near-Term Investment

Starbucks' business strategy looks likely to change materially, consistent with new CEO Brian Niccol's "Back to Starbucks" plan. The firm continues to play in a global category of one, with the firm's $36 billion in 2024 revenue outpacing its closest global competitor, Inspire Brands' Dunkin', by a factor of 3 globally and by a factor of 2 in the firm's home US market. Recent strategic misfires, however, have left the firm wandering in the wilderness, with global comparable store sales falling 2% in fiscal 2024 on the back of consumer price sensitivity, macroeconomic weakness, and deteriorating value perception. In the firm's fourth quarter of 2024, traffic fell by a brutal 10% in its core North American markets, with softness broadening from the afternoon daypart and occasional customers to the full gamut of more than 34 million Starbucks Rewards members, espousing substantial concern.