Among the reasons I could never go into politics is that I’m way too sensitive. Being governor of Michigan would be my dream job, but if I only had the 37% approval rating of Gretchen Whitmer, the state’s tree hating leader, I’d be alarmed that nearly six million Michiganders either didn’t like me, or found my leadership so uninspiring they didn’t have an opinion. I’d imagine that everywhere I went, more than 60% of the people I encountered had nothing good to say about me.
My sensitivity is also the reason why I’d never want to be in the top compensation tier of America’s obscenely paid CEOs. If someone hired me to turn around a chain of troubled coffee shops and gave me $96 million for my first four months on the job, I’d be up 24/7 coming up with innovative ideas so people wouldn’t doubt that I was deserving of such a rich payday. The pressure would be unbearable.
Brian Niccol, chairman and CEO of Starbucks who received $96 million for his first four months on the job, apparently feels no such pangs of responsibility or pressure.
Good vibes
Niccol has borrowed a page from Kamala Harris’s failed presidential playbook and hopes to turn around Starbucks by injecting some good vibes into its stores, returning them to a long bygone era when they were indeed upscale and were staffed with baristas who really gave a damn. Niccol’s other innovative “Back to Starbucks” ideas are drinks ready in four minutes, no upcharges for non-dairy milks, a simpler menu, a store redesign, free refills and the return of the condiment bar, where people can pour their own milk and steal packages of sweeteners.
Oh, I almost forgot, the chain is again serving coffee in ceramic cups and baristas have returned to writing personal notes on to-go cups with company supplied sharpies.
“It is clear we need to fundamentally change our strategy to win back customers,” Niccol told investors. “We’re reclaiming the third place, so our cafes feel like the welcoming coffeehouse our customers remember.”
For Niccol’s benefit, allow me to share the welcoming coffeehouse experience I remember the first time I visited a Starbucks. It was in a trendy Chicago neighborhood some 30 years ago when Starbucks had only just begun its expansion outside its Seattle home.
“Welcome to Starbucks!” an effusive young woman greeted me when I entered the store out of curiosity. The woman excitedly explained the Starbucks concept and why the store’s coffee justified its premium pricing. The coffee was awesome, piping hot and packed with so much caffeine I was wired for hours.
It was a delightful experience.
Recent Starbucks experience
My most recent Starbucks experience was Christmas Day, when I had to suffer the place because my local Peet’s coffee was closed. There were three miserable looking women behind the counter, and while it didn’t appear that anyone of them were engaged in any customer activities, it still took a couple of minutes until one of them took my order. I drink brewed drip coffee, and Starbucks in Los Angeles replaced all its batch coffee makers with a Keurig-like machine that brews one cup at a time. I ordered a medium, which Starbucks calls a Grande, and it took about a minute to brew.
The coffee was tasteless, not as hot as when brewed with Starbucks’s previous coffee machines, and there was sediment on the bottom. I’m guessing that the former McKinsey clown who Niccol succeeded calculated the company would waste fewer coffee beans brewing one cup at a time, and wasn’t bothered that it would take nearly a minute to brew an individual cup of coffee, creating a backup if multiple customers ordered brewed coffee at the same time.
I drank my coffee in the store, as Niccol says he wants customers to do, but the experience was as depressing as the one I recounted four years ago. Loud and annoying music was playing through tinny speakers, which I suspect contributed to all the customers looking as miserable as the baristas behind the counter. An ENT doc explained to me years ago that loud music can cause people to shut down, particularly if they don’t enjoy it.
Ballyhooed initiatives
Reading about Niccol’s media ballyhooed initiatives increased my already considerable wariness about him, especially after reviewing his record at Chipotle, where he served as CEO for six years.
Under Niccol’s leadership, the fast-casual burrito chain nearly doubled its sales. Notably, that growth resulted from opening more drive-through options and expanding the company’s loyalty program, not creating improved vibes. Wall Street loves Niccol because under his watch, Chipotle’s stock price soared 800 percent.
Here’s some less than flattering insight about Niccol and his record at Chipotle and Taco Bell, a fast “food” chain he once helmed.
In November of last year, Niccol was named in a class action lawsuit for allegedly deceiving Chipotle investors by concealing how many of its restaurants were skimping on portions, forcing the chain to spend more on ingredients and hurting its stock price. Keith Lee, a popular food influencer and previously collaborator with Chipotle, earlier slammed the restaurant’s chicken portions in a scathing TikTok review. A Wells Fargo analyst subsequently ordered 75 burrito bowls to test portion sizes and discovered that the consistency of the portions varied widely.
After the fallout from the bad publicity, Niccol told investors that there was “never a directive” to reduce portion sizes, but “the feedback caused us to re-look at our execution across our entire system.” Chipotle’s food costs subsequently soared more than 30 percent, causing the stock to plummet.
If Niccol never issued a directive to skimp on portions, that reflected poorly on Chipotle’s quality control under his watch.
Imperial CEO
Niccol has some disturbing similarities to former Boeing CEO Dave Calhoun, a.k.a. Lord Calhoun of Lake Sunapee, who once declared that Boeing’s headquarters was where he happened to be. After Niccol joined Chipotle, he relocated the company’s headquarters to tony Newport Beach in Southern California, disrupting the lives of 400 employees.
Why Newport Beach? That’s where Niccol lives.
When he was hired, Starbucks disclosed that Niccol would work out of a company-paid office in Southern California with an assistant and travel to Starbucks’s Seattle headquarters on an as needed basis. Starbucks announced this week that it had hired Taco Bell vets Mike Grams and Meredith Sandland, whose LinkedIn profiles say they are respectively located near or in Newport Beach, which incidentally is near Irvine, where the headquarters of California’s beloved In-N-Out Burger is located.
Starbucks won’t disclose the size of its headquarters staff, but they shouldn’t be surprised if moving to Southern California becomes a condition for keeping their jobs. Niccol has absolute control of Starbucks, so there’s nothing to stop him. Former board chair Melody Hobson relinquished her title to Niccol when she personally recruited him; it’s widely viewed a poor corporate governance for a CEO to also chair their company’s board.
When Niccol was CEO of Chipotle, the company was criticized for offering what the Teamsters union called an “insulting” wage increase in contract negotiations with a store in Lansing, Mich. The National Labor Relations Board found that Chipotle under Niccol’s leadership violated federal labor law by closing a store in Augusta, Maine, that tried to form a union and firing workers. The company agreed to pay $240,000 to the former employees to settle the complaint.
The New York Post reported that more than a half-dozen protesters were cuffed Tuesday during a “sit-in” demonstration at a Park Slope Starbucks store in Brooklyn, NY, that unionized in October and is set to close by the end of this month. The rally, organized by labor union Workers United, began about 11:30 a.m. Tuesday with a “sip-in” – composed of dozens of workers, former workers and allies – protesting Starbucks’ “illegal” move to suddenly close the bustling Park Slope store on Friday and leave union workers without a fair contract.
“I 100% believe that unionization was a reason why we’re closing,” Starbucks employee Jenn Skinner, told the Post.
“This is a beautiful store with a neighborhood who loves them and workers who love coming to work every single day,” union organizer Michelle Eisen, told the Post. “This is exactly the coffeehouse vibe that they say that they want to get back to, and here it is. And they are closing this store. That is unacceptable.”
Zero pay gains
Niccol has demonstrated success as an operations wizard, but so far, he hasn’t shown much understanding for Starbucks’s labor issues, which likely will be heightened because of his pornographic compensation. Starbucks union members say the company offered them “zero economic gains” in the first year of a proposed contract.
Niccol’s biggest problem is convincing thousands of entitled baristas to be pleasant and customer focused. If Starbucks’s west Los Angeles stores are indicative of its baristas across the country, the challenge is formidable.
I also wonder how Starbucks can thrive if Niccol achieves his goal of only reducing wait times for a drink to four minutes. Many customers visit Starbucks daily, and a four-minute wait translates to 28 minutes of idle time a week and nearly 25 hours a year to drink lousy, overpriced coffee.
At my local Peet’s, the wait time is typically less than a minute because if a line forms, a staffer immediately opens another register. They are too busy and focused to write cute messages on cups, but everyone personally greets me and knows the names of all the regulars. The great vibes exuded by Brian and his staff are contagious, as customers are friendly, and many say hello to each other.
My cousin Rob experiences the same personalized service at his more upscale Los Angeles coffee place of choice, which also scribbles personalized messages on his cups.
Turnaround delusions
Niccol is deluding himself that he can turn around Starbucks hiring some former hotshot executives from Taco Bell. His success will depend on his ability to find thousands of talented twentysomethings like Brian, the store manager of my local Peet’s, the regional chain’s most successful store in the Los Angeles region.
The president of Peet’s coffee is Eric Lauterbach, who has been with the company since 2010. He is responsible for all the company’s domestic and global businesses, including its subsidiaries: Stumptown Coffee, Intelligentsia Coffee and Peet’s China. Lauterbach lives in San Francisco, across the Bay from Peet’s headquarters in Emeryville.
If I were looking for someone to turn around Starbucks, Lauterbach would be one of my targets. Unlike Niccol, Lauterbach hasn’t jumped around a lot and has demonstrated a certain loyalty to his organization. But everyone has their price, and an offer for a $96 million payday for four months work might be one that even Lauterbach couldn’t refuse.