Yahoo Finance The 'great human reconnection' will bring customers back to Starbucks: CEO
Starbucks (SBUX) CEO Kevin Johnson says the coffee giant is poised to benefit from what he's dubbed "the great human reconnection" as customers return to cafés post vaccine.
"I'm very proud of how Starbucks partners have showed up this last year, but we realize that this, this pandemic has had people now we've all been working from home, schooling our children from home and really adapting our lives where we're much more isolated. And we see unfolding now can only be described as the great human reconnection. As people get vaccinated and start to go back to things that are more familiar, that great human reconnection is going to bring them back to Starbucks, and we're there to welcome them in our stores across the country, and around the world," Johnson told Yahoo Finance on Wednesday from the company's 29th annual meeting of shareholders.
Johnson, who's leveraged Starbucks' expertise to help its home state of Washington vaccinate with more efficiency and throughput, said as vaccination programs accelerate across the country, it's giving customers more confidence to venture outside of their homes.
"[And] they all seek that human connection. They seek being a part of their community. They are looking for safe, familiar, and convenient experiences. And you know what we're working to do is ensure that Starbucks is destination number one for those customers who are now venturing out of their homes," Johnson added.
This year, Starbucks celebrates its 50th anniversary. Initially founded in 1971 as a small coffee roaster in Seattle's Pike Place Market, Starbucks has transformed into a global coffee behemoth with 33,000 stores world-wide with 400,000 employees, known internally as "partners." In the last year, like all businesses, Starbucks has had to navigate the coronavirus pandemic, which accelerated changing consumer behaviors that have guided the coffee chain's transformation.
"[The] recovery path that we've been on for the last few quarters, it has not been linear, week to week or month to month, but sequentially quarter to quarter we've continued to recover our business and you know what, what we see unfolding is there's kind of five consumer behaviors that we've optimized it really transformed the Starbucks experience around," Johnson said.
Five consumer behaviors
The first of those five consumer behaviors is the desire for human connection.
"I know, just in my own personal situation, I felt very isolated and alone at times. I just want to socialize. In fact, Vivek Murthy, our surgeon general, coined the phrase 'a social recession' that this pandemic has created. And so people are going to seek to be part of that community. So they're going to come back to our stores, whether they're coming there to sit and enjoy their food and beverage in the store," Johnson said.
The second key behavior is that consumers are looking more for experiences that effortlessly fit their lifestyle, including on-the-go, Johnson added.
Starbucks, which has long established itself as a destination — or a "third place" between work and home, as the company likes to call it — has said in recent months that technology will continue to play a critical role as it emerges from the pandemic. One of the biggest underpinnings of Starbucks' transformation is its mobile app. At the end of the fiscal first quarter ended Dec. 27, the decade-old Starbucks Rewards app boasted 21.8 million 90-day active members in the U.S., up 15% from a year ago.
"And that's where we've amplified our mobile app, the digital channels that we have for mobile order pickup, curbside, delivery, and drive-thru, so we're going to continue to see growth around the need state of convenience," Johnson added.
Elsewhere, customers are looking for consistency when it comes to their customized beverages. According to Johnson, they're also increasingly becoming focused on environmental sustainability with their food and beverage habits, with oat milk and other alternative milks becoming very popular choices, especially with the younger generations.
The final consumer behavior Johnson highlighted is that "consumers care about the brands that they do business with."
"They want to know they're doing business with the brand that has like-minded values. And so the fact that Starbucks has put a stake in the ground on being a planet positive company, a company that gives more than we take from the planet. We put a stake in the ground on being a people positive company basically investing in the future of humanity around inclusion, opportunity, and community," Johnson added.
Planet positive, people positive
Just over a year ago, Johnson outlined a "multi-decade aspiration" plan for environmental sustainability, including a more environmentally friendly menu, reusable packaging, storing more carbon than the company emits, providing more freshwater than it uses, and eliminating waste. In December, Johnson formalized those goals to reduce greenhouse emissions, water withdrawal, and waste by 50% by 2030.
To further its sustainability commitments, Starbucks is investing $150 million in its upcoming China Coffee Innovation Park, the first sustainable roasting plant, a sign of its commitment to the China market. Starbucks operates around 4,800 stores in China, and Johnson believes that the company can continue to build new stores there in his lifetime and "still not run out of addressable market."
"We're highlighting all of the state-of-the-art technology, and this is an example of investments we're making to be a planet positive company, and planet positive, to us, means that we give more than we take from the planet. So when you think about our carbon footprint, our long-term aspiration is to store more carbon than we emit. And so, this roasting plant is just one example of the investments we're making around environmental sustainability," Johnson said.
As for Starbucks' employees, Starbucks boosted wages for partners in December. About one-third of Starbucks retail partners in the U.S. now earn at or above $15 per hour. Johnson expects all partners in the U.S. to be at or above $15 per hour in the next two to three years.
"The mission of Starbucks has always been grounded in the human experience, and culturally, we have always put our partners first. We know that if we invest in and care for our partners, they, in turn, invest in taking great care of our customers, and that's in many ways how we create that great Starbucks experience. It all starts by taking care of our green apron partners. And that's not just a question of wage — it's wage and benefits, and how do we create the environment for those partners to show up in their authentic self and do their best work."
Among the other benefits, Starbucks offers employees health coverage for both full-time and part-time partners, a retirement plan, equity rewards, paid time off, parental leave, and full college tuition coverage for Arizona State University's online programs.
"And so we've always been the kind of company that has a purpose that goes beyond the pursuit of profit, the kind of company that cares about all stakeholders, starting with our partners, including our customers, the communities we serve as well as our shareholders," Johnson said.
Even while navigating a global pandemic, expanding benefits, investing in wages, digital, and innovation, Starbucks has seen its share price rise by nearly 87% in the last year. While Starbucks has produced a significant increase in shareholder value, Johnson points out that there's been an increase in stakeholder value, starting with its employees.
"Now we hope that more and more companies will follow that path and that direction in their own way, and we think it's important for society. Because you think about society's problems — the problems we face in society are going to require each of us as individuals to unite and play a positive role, and each company to come together and do what they can to contribute back to society and contribute back to environmental sustainability. And if we do that all together, I believe we could make the world a better place," Johnson said.
Julia La Roche is a correspondent for Yahoo Finance. Follow her on Twitter.
