Next round of investments will lead to enhancements in partner pay, modernized training and collaboration, store innovation and a return to the celebration of coffee
With these new investments and record customer demand, Starbucks expected to deliver historic financial performance, returning to healthy long-term growth
Starbucks Corporation (NASDAQ: SBUX) – Today, on Starbucks FY2022 Q2 Earnings call, ceo Howard Schultz announced the company will make additional investments in partners and stores for prioritized areas such as increased pay, modernized training and collaboration, store innovation, and the celebration of coffee, bringing the total investments to nearly $1 billion in this fiscal year alone. This decision enables Starbucks to meet record customer demand and partner needs in an operating environment deeply impacted by COVID.
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Starbucks announced the company will make additional investments in partners and stores for prioritized areas such as increased pay, modernized training and collaboration, store innovation, and the celebration of coffee, bringing the total investments to nearly $1 billion in fiscal year 2022 alone. (Photo: Business Wire)
On the call with investors, Schultz shared, “What you will see is the transformation of the Starbucks customer and partner experiences. The transformation will accelerate already record demand in our stores. But the investments will enable us to handle the increased demand – and deliver increased profitability - while also delivering an elevated experience to our customers and reducing strain on our partners. And we will reintroduce joy and connection back into the partner experience.”
Since his return as ceo on April 4, Schultz and other Starbucks executives have been visiting retail and roasting plant partners around the country to hear firsthand how their work and lives have been impacted over the last two years. In immersive collaboration sessions, many partners spoke bluntly of the challenges on and off the job, and the unprecedented operational and physical impacts from COVID on the partner and store experience. They offered suggestions for improvements and innovations based on their direct experience, gave feedback on investments under consideration, and voiced hope for what the Green Apron can stand for in the future.
A truly different kind of company, for partners, by partners
Schultz today announced the following investments designed to transform and elevate the experience of Starbucks partners and customers – all co-created by retail and non-retail partners working together.
- The return of the Coffee Master and Black Apron programs this Summer, reaffirming and recognizing Starbucks partners deep passion for—and commitment to—coffee excellence. Additionally, eligible partners who complete the Coffee Master program will have the chance to be selected for the Leadership in Origin program at Hacienda Alsacia, Starbucks coffee farm in Costa Rica.
- More opportunities for partners to connect, be heard and have a voice, through the launch of a new partner app in August to create one digital community for all 240,000 U.S. partners, extending collaboration sessions to support partners, plants, retail leaders and to every store with dedicated connection time over the next month.
- Additional and more effective training, including doubling the amount of training time for new baristas beginning June 21, doubling the amount of training time for shift supervisors beginning August 30, and more training for baristas and supervisors already in role. Enhancements also include a redesigned “First Sip” barista training program, a newly designed shift supervisor program and more hands-on practice time for baristas.
Increased pay and support with financial stability. As previously announced, Starbucks is moving all U.S. store partners to a $15/hour floor this summer, effective August 1, and also adding incremental increases that will apply to all U.S. store partners, while recognizing and rewarding tenure. On August 1, average hourly pay at Starbucks will be nearly $17/hour nationally. All partners hired on or before May 2 will get either a 3% raise or $15/hour, whichever is higher.
Further, Starbucks will continue to recognize tenured partners. Partners with 2-5 years of service will receive at least a 5% increase or move to 5% above the market start rate, whichever is higher. Partners with 5+ years of service will receive at least a 7% increase or move to 10% above the market start rate, whichever is higher.
On August 1, Starbucks will also double our planned investments in store manager, assistant store manager and shift manager pay for leaders hired on or before May 2. These are one-time investments in base pay in addition to our planned FY23 raises this fall.
- Continuing to build and offer relevant benefits based on partner ideas and input, including opportunities to increase sick time accrual, implementing a new financial stability toolkit benefit, and implementing tools and solutions to help partners refinance better student loan solutions.
In a letter to Starbucks partners earlier today, Schultz wrote, “As I shared with you last month, love and responsibility are what brought me back to Starbucks: my love of the company and my deep responsibility to our partners and shareholders. Hearing from so many of you since my return has only deepened my commitment and affirmed the need to take bold action to restore your trust and belief in Starbucks. I could not be more optimistic or confident in our next chapter that is now underway.”
Additional Investments Planned as Co-Creation Continues
As Schultz and Starbucks leaders continue to meet with and hear from partners, additional areas of investment have been prioritized for upcoming investments:
- Introduction of credit card / debit card tipping by late 2022 as ways for customers to further recognize their favorite baristas.
- Equipment and technology enhancements, including resolving all “non-critical” repair and maintenance immediately, moving to upgrade all in-store iPads with new models, accelerating rollout of new equipment like MerryChef Ovens and Mastrena 2 espresso machines and more.
- Launching a modernized recognition program and expanding a portfolio of upskilling and career mobility programs.
To investors on the earnings call this afternoon, Starbucks chief financial officer, Rachel Ruggeri spoke about the investment decisions, “We are confident the investments we are making in our partners, our stores and our brand, will deliver significant returns, in excess of historical levels, resulting in accelerated long-term growth.”
The company also confirmed it will move its Investor Day previously planned for December in New York to take place now in September in Seattle.
New pay and benefits changes will apply to stores where Starbucks has the right to unilaterally make these changes. Where Starbucks lacks the right to unilaterally make these changes (for example, stores where there is a union or union organizing) Starbucks will provide wage increases that were announced in October 2021 and will otherwise comply with all applicable legal requirements.
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting high-quality arabica coffee. Today, with more than 34,000 stores worldwide, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at stories.starbucks.com or www.starbucks.com
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