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  • Writer's pictureJohn James

Starbucks Announces Ambitious Strategy to Expand with 17,000 New Locations by 2030

Starbucks has unveiled its latest growth strategy, which involves a significant global expansion and a plan to save $3 billion in costs over the next three years.

The coffee giant aims to extend its global presence to 35,000 locations outside of North America by 2030, increasing from its current count of approximately 20,200 international cafes as of October 1. In total, Starbucks intends to reach a total of 55,000 locations worldwide by 2030, up from its current count of more than 38,000.

Michael Conway, president of Starbucks’ international and channel development divisions, emphasized that the company expects three out of every four new stores in the near term to be opened outside of the United States, as Starbucks seeks to make its store portfolio increasingly global.

Starbucks has also announced a cost-savings plan of $3 billion. Executives revealed that $1 billion of these savings will result from increased efficiency in its stores, with the remainder stemming from reductions in its cost of goods sold.

In addition to its expansion and cost-saving initiatives, Starbucks is implementing the final component of its "Triple Shot Reinvention Strategy." This includes substantial wage increases for baristas, with the aim of doubling their hourly income by the end of fiscal 2025 compared to fiscal 2020 earnings.

The wage increase will be achieved through a combination of extended hours and higher pay rates, with further details to be provided in the coming week.

This announcement comes in the wake of more than 350 Starbucks locations unionizing under Workers United, according to data from the National Labor Relations Board.

To date, collective bargaining agreements have not been reached at any of these locations, and both the union and the NLRB have accused Starbucks of violating federal labor laws, including withholding wage hikes at unionized stores. Starbucks has denied all allegations of union-busting.

In its fiscal fourth-quarter results, reported earlier on the same day, Starbucks outperformed Wall Street's expectations for both quarterly earnings and revenue, resulting in a 9.5% surge in its share price. This reversal of fortunes erased previous losses earlier in the year, pushing the company's market capitalization to $115 billion at the close of the day.

During the conference call, Starbucks CEO Laxman Narasimhan highlighted that the "reinvention" plan introduced in September the previous year is ahead of schedule and is already driving sales and efficiency improvements for the company. One example of progress is the deployment of the chain's new single-cup drip coffee brewer, which is now installed in more than 600 locations.

This reinvention strategy tackles a range of issues that have posed challenges to Starbucks and its baristas in recent years. As customer orders have become more complex, exacerbated by the popularity of cold beverages and the introduction of premium add-ons such as cold foam, the demands on baristas for quick and high-quality service have increased.

Additionally, the shift to mobile app and drive-thru orders has raised expectations for swifter delivery. As a result, baristas have faced difficulties in maintaining both speed and quality of service.

Former Starbucks CEO Howard Schultz introduced the reinvention plan, which aims to streamline operations, improve service quality and speed, and implement more automation. Schultz, who returned to the company for a third stint as CEO, acknowledged that Starbucks had made "self-induced mistakes" and had lost its way.

He stepped down from his role in March, handing leadership over to Narasimhan, a newcomer to the company who pledged to execute the plan.

During an investor day in September the previous year, Starbucks forecasted annual earnings per share growth of 15% to 20% over the next three years, along with annual same-store sales growth of 7% to 9%. While the company's same-store sales projection for fiscal 2024 falls slightly short of this range, the rest of its forecast for the next fiscal year aligns with these targets.

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