Global coffee giant Starbucks has announced a significant $1 billion restructuring plan that includes the closure of 400 underperforming stores in North America and the layoff of 900 corporate employees. The move is part of a new strategy dubbed “Return to Starbucks,” led by CEO Brian Niccol, who took the helm in September 2024 with a mandate to revitalize the iconic brand.
The Rationale Behind The Shakeup
The decision comes as Starbucks grapples with several challenges, including a notable decline in sales over six consecutive quarters and a 9% drop in its stock value since the beginning of the year. The company faces intense pressure from a new wave of competitors, including independent artisanal coffee shops like Blue Bottle and drive-thru focused chains such as Dutch Bros. Furthermore, shifting post-pandemic consumer habits have seen reduced foot traffic in some urban centers, while rising inflation has made customers more price-sensitive. A recent UBS survey of 1,600 consumers revealed that over 70% plan to visit Starbucks less frequently in the coming year due to higher prices.
A Return To The Third Place
The “Return to Starbucks” strategy aims to refocus the brand on its original identity as the “third place”—a comfortable space between home and work. Niccol, who has a track record of successfully reviving major brands like Chipotle and Taco Bell, has criticized the company’s recent overemphasis on mobile orders and delivery, which he believes diluted the core brand experience. The new plan includes renovating 10% of its US stores with more seating, sofas, and power outlets, reducing the menu by 30% for efficiency, and bringing back personalized touches like baristas drawing on cups.
Relevance To The MENA Market
While the announced store closures are currently focused on North America, the strategic shift at Starbucks’ headquarters has significant implications for the MENA region. The global pressures of competition and price sensitivity are highly relevant in the sophisticated and rapidly growing GCC coffee market. Regional and local coffee brands could see this as an opportunity to capture market share by doubling down on unique in-store experiences or hyper-efficient service models. For MENA-based founders in the F&B and retail sectors, Starbucks’ current challenges offer a valuable case study on the risks of rapid expansion at the expense of brand identity and the critical need to adapt to evolving consumer expectations in a post-pandemic world.
About Starbucks
Starbucks Corporation is an American multinational chain of coffeehouses and roastery reserves. As the world’s largest coffeehouse chain, it is seen as the main representation of the United States’ second wave of coffee culture. The company offers a wide range of coffee and tea products, fresh food items, and other beverages, operating more than 32,000 locations across the globe.
Source: Rowad Al A’amal
