We know that coffee giant Starbucks (SBUX) is eager to make itself more inviting, more welcoming, and it is counting on its barista forces to handle a lot of the heavy lifting on that. But in a move that might throw a monkey wrench into that, Brian Niccol wants to also speed up the baristas, getting a drink into a customer’s hand from order in just four minutes. Investors caught the puzzling contradiction too, and sent shares sliding fractionally in Thursday afternoon’s trading.
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This is part of the Green Apron Service concept, which we heard about a while ago, and it is getting a bit more flesh on its bones. Getting those drinks in hand at that speed is part of what Niccol believes it will take to make Starbucks into “…the world’s greatest customer service company again.”
But even Niccol realizes, apparently, that the idea of making a store welcoming, comfortable, and blisteringly fast is one that is fraught with internal contradictions. Thus, Niccol plans a hiring spree to “…put…enough partners on the roster in the stores and then deployed correctly so they can provide that customer connection, that experience, that frankly Starbucks really was founded on.” Thus, Starbucks will not be counting on a handful of overworked baristas to be both fast and friendly, but rather, counting on a much deeper bench that can be fast and still provide excellent service.
The Chinese Problem
Yet this may not be the approach that will work in China, according to a panel of private equity and Chinese tech companies. In fact, that panel recommended that Starbucks hire a lot fewer people, have smaller stores, and slash its prices instead. In other words, the panel noted, be more like the home-grown competition that is currently eating your lunch in China.
This concept is alarming the local Chinese management team, however. Reports note that they are concerned that the brand they helped build in China will ultimately fall apart to become “…another low-price, trend-following chain.”
Is Starbucks Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 14 Buys, nine Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 0.74% loss in its share price over the past year, the average SBUX price target of $100.61 per share implies 7.62% upside potential.
