Just before Christmas, the Starbucks Workers' Union announced strikes in the three major cities of Los Angeles, Chicago, and Seattle, where Starbucks is headquartered, to protest issues such as wages, benefits, and staffing. The five-day strike, which began last Friday local time, resulted in the closure of Starbucks stores in Los Angeles, Chicago, and Seattle. The union stated that the strike will spread over the next few days and is expected to cover hundreds of stores by Christmas, unless the company reaches an agreement with the union.
Salary not agreed upon
No one wants to go on strike, "said Alhajabdi, a barista at Starbucks in Texas, in a union statement." This is a last resort, but Starbucks has broken its promise to thousands of baristas, leaving us with no choice
On December 20th local time, the Starbucks Workers' Union announced strikes in multiple cities in the United States to protest against Starbucks' unfair labor practices and low wages. According to the statement, the representatives expressed their willingness to return to the negotiating table to resolve the relevant issues.
Philadelphia barista and negotiator Baldwin stated that Starbucks needs to invest in baristas who support its operations. My hourly wage is currently $16.5, but the company has announced a salary increase of only 2.5% next year, which means an increase of only $0.4 per hour, not even enough to cover the price of a Starbucks drink
According to the union, 98% of members voted in support of the strike resolution on the 17th to demonstrate their determination to protest against "hundreds of unresolved unfair labor allegations". The Starbucks Workers' Union currently represents employees from over 500 stores in the United States.
Union President Fox said that although Starbucks claims to value all employees, we cannot accept the salary of baristas and cannot address hundreds of unfair labor issues.
As early as February this year, the union reached a framework agreement with Starbucks to guide the organization and collective bargaining. The two sides launched negotiations based on this framework in April, aiming to resolve issues including multiple unresolved legal disputes.
In a statement released on the evening of December 19th, the union stated that since making the commitment in February, the company has publicly stated multiple times that it will reach a contract before the end of the year, but so far, it has not presented any sincere economic proposals to employees.
However, regarding this strike, Starbucks stated that the negotiation meeting was "prematurely" concluded by the union. Starbucks stated that they are ready to continue negotiations, but accused union representatives of prematurely ending the negotiation meeting.
However, the union stated in a Facebook post last Friday that with less than two weeks until the year-end contract deadline, Starbucks has not yet proposed any serious economic plans.
The union also rejected a proposal that included not immediately increasing wages and guaranteeing only a 1.5% salary increase for future years.
Starbucks stated in a statement that Workers United's proposal calls for an immediate increase of 64% in the minimum wage for hourly workers and a total increase of 77% over the three-year contract period. This approach is unsustainable
The Starbucks Workers United union planned this action a few days before Christmas Eve. This is an important period for Starbucks, as shoppers typically enjoy drinks such as latte when completing holiday shopping. In addition, the company will also sell a large number of gift cards at the end of the year.
According to insiders, due to Starbucks' poor financial performance, many employees of the company only received 60% of their total bonuses in the most recent fiscal year this year. This means that compared to previous years, Starbucks employees' bonuses have decreased by nearly 40%. This news not only disappointed the employees, but also raised concerns about Starbucks' future development from the outside world.
Performance faces challenges
As the world's largest coffee chain, Starbucks has been full of challenges this year - sales have declined.
According to the latest financial report, Starbucks' revenue for the fourth quarter of fiscal year 2024 was $9.07 billion, a year-on-year decrease of 3.2%; Net profit was 910 million US dollars, a year-on-year decrease of 25.4%. For the entire fiscal year 2024, the company's total revenue was 36.18 billion US dollars, a year-on-year increase of 0.6%; Net profit was 3.76 billion US dollars, a year-on-year decrease of 8.8%.
As for why the decline is so severe, Starbucks CFO Rachel Ruggeri said at the earnings conference that the intensifying competition and weak macro environment have affected consumer spending.
The reasons for Starbucks' decline in performance are diverse. The impact of widespread inflation has led American customers to reduce their coffee consumption, posing a serious challenge to brands such as Starbucks that rely on daily consumption. Meanwhile, the service quality of Starbucks stores has also been heavily criticized. Customers complain about the store's long waiting time for food pickup, inaccurate order information, and reduced product variety, which reduces their desire to purchase.
Faced with these challenges, Starbucks' new CEO Nicole is attempting to reverse the situation through a series of new policies. She plans to continue investing in technology and work systems, eliminating the need to produce complex products, simplifying menus, optimizing beverage production processes, reducing the burden on baristas during peak hours, and enabling them to complete orders faster.
In addition to improving customer complaints, Nicole also hopes to turn Starbucks into a comfortable third space. To this end, she intends to restore the handwritten cup tradition that has gradually disappeared since 2012, add ceramic mugs and comfortable seats to the store, restore seasoning tables, etc., in order to improve the service quality of the store and attract more customers to stay briefly.
However, Starbucks' reduction in employee numbers has sparked some controversy. According to the documents submitted by Starbucks to the US Securities and Exchange Commission, as of September 29th this year, the number of employees working in the company's coffee stores has decreased by 8% compared to last year, while at the same time, there has been a net increase of 513 stores in the United States. This raises concerns about whether Starbucks is overly focused on expansion and neglecting the manpower needs of its stores, thereby affecting customer experience and service quality.
At the previous Q3 conference call, then CEO Laxman Narasimhan made it clear that the industry has experienced unprecedented store expansion and large-scale price wars in the past year, with some peers even willing to sacrifice same store sales and profitability, which has caused significant and permanent changes to the market environment.
In addition, the growth in the Chinese region is also weak. Starbucks China achieved a net revenue of 783.7 million US dollars in the fourth quarter of 2024, a year-on-year decrease of 7%; Same store sales decreased by 14%, average order value decreased by 8%, and order quantity decreased by 6%. For the entire fiscal year 2024, Starbucks China's revenue was $2.958 billion, a year-on-year decrease of 1.4%. In terms of same store sales, Starbucks China's same store sales decreased by 8% year-on-year.
The price war between Luckin Coffee's 9.9 yuan and Kudi Coffee's 8.8 yuan in 2023 has prompted many coffee brands to follow suit. For example, Lucky Coffee has launched a 2 cup 9.9 yuan promotion, and the "9.9 yuan" promotion has become standard.
Although Starbucks verbally insists that it will not participate in the price war, in reality, it has indirectly lowered prices through a series of strategies. For example, promotional activities such as "Get 15 yuan off for orders over 70 yuan", "69.9 yuan limited time three specified drinks", and "49.9 yuan double cup new coffee" have been launched; Participating in group buying activities on local online life platforms such as Meituan, Elemente and Tiktok, the preferential price for a single cup of some products was even "beaten" to less than 20 yuan.
For the future Chinese market, Nicole stated that she still needs to spend time better understanding the Chinese market and operations. But it can be felt that the competitive environment in the Chinese market is very fierce, and the macro environment is very severe. It is necessary to figure out how to achieve growth in the current and future.