There are over 170,000 possible Starbucks drinks orders – and it’s killing the company
YOU are already in the queue at Starbucks – having failed to order by the mobile app – when you spot this person. It’s the guy who’s looking at a Post-it note that holds the orders of his colleagues.
You soon realise you will be late for your next meeting, because this person plans to order six coffee beverages, each of which involves some combination of tall venti grande double-pump, one to four shots of espresso, half-caf, oat milk, nonfat milk, soy milk, milk milk, whipped cream, syrup, brown sugar, white sugar, no sugar and mocha drizzle, from the pike position with two and a half twists.
Even ordering via the app has its issues. There’s often a crowd waiting at the end of the counter because Gen Z customers, which tend to prefer anything but human interface, have overwhelmed the baristas with the same orders-of-magnitude drinks.
Starbucks says there are more than 170,000 possible drink combinations available, but outside estimates have put the number at more than 300 billion. And somehow the person in front of you always seems to be ordering 100 million of them.
If the degree of difficulty in a typical Starbucks order now seems to be Olympian, so are its troubles.
The Seattle-based company has become the Boeing of coffee bars. So much so that, like the airframe maker, Starbucks has jettisoned its chief executive, Laxman Narasimhan, and replaced him with Brian Niccol, who until recently was the CEO of the Chipotle Tex-Mexish food chain.
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Although Niccol’s appointment drove up Starbucks’ stock price, the two companies sometimes have the same problem: too many choices and not enough staff, which at peak times is almost certain to deliver disappointment as much as it does burritos or lattes.
Starbucks and every other publicly traded food and beverage franchise face the same issue: They have a roughly 1,500- to 3,000-square-foot store envelope, and they have to figure out the optimal throughput that can provide the annual sales growth that will keep Wall Street investors sated. And they are never sated.
The answer is always: Add more stuff, which creates ever more complexity, from supply chain to food safety to packaging to scheduling and delivery.
Consider outfits like Pizza Hut that once sold only … pizza. Their calculation today is that they’ve got one pizza oven in each store, and they have to keep it hot through the day anyway, so they ask: What else can we run through this thing, and profitably?
And oh, it has to be simple enough for teenagers to operate. That’s why pizzerias are now selling flatbreads, chocolate chip cookies, brownies and Cinnabon mini-rolls – anything that can be baked. Because you always want a Cinnabon after you’ve consumed three slices of pepperoni pizza.
Starbucks has to deal with both a complexity issue and a culture issue. Since the company went public in 1992 at US$17 a share, Wall Street pressure meant adding more stores, more snacks and sandwiches and more equipment such as an oven for breakfast items and pastries.
Drink variations began to expand well beyond plain coffee – hello, pistachio crème Frappuccino. The company would even add alcohol to its upscale cafes to address the evenings – a time of day that was always weak.
Howard Schultz, who essentially created the company, famously envisioned Starbucks as a “third place” (after homes and offices) where people could gather and talk and sip.
He modeled it on Milanese coffee bars. He also promised workers would get a fair wage and benefits. The first Starbucks, opened at Pike Place Market in Seattle in 1971, was and is laughably simple. The decor and the menu were minimal: coffee, tea and spices. But by 1997, Starbucks was selling a variety of foods and drinks. In 2003, it went all in on customisation and personalisation.
Starbucks seems culturally conflicted between being the equivalent of a charging station for humans and the rest and refuge area that Schultz envisioned.
Trying to do both is complex in and of itself – what kind of ad messaging do you send out, for instance? What food items do you add or delete for the grab-and-go crowd? And from afar, it can be difficult to tell which version you’re heading toward.
One Starbucks outlet in Lower Manhattan in New York has opted for the human charging station model: There are no seats in the store; just pick up your drink and go.
And while Starbucks is using scheduling algorithms to try to maximise labour efficiency, there always seems to be one fewer employee than needed. That is, unless you’re at an airport, where there are generally four fewer employees than needed.
This is a problem Starbucks shares with many companies – convenience stores, cosmetics outlets, airline check-in counters – that have decided that, should the algorithm get the scheduling wrong, they would rather risk having too little labour on hand than too much. Pity that there’s no accounting entry for lost revenues from customers who walked away.
Companies have always had to deal with choice and customization versus the complexity that comes with it. In many businesses, including food and grocery, the 80/20 rule applied.
You would get 80 per cent of your business from 20 per cent of the product line, but it was still worth giving customers more choice to hang on to as many of them as possible. But we know that too much choice can be paralyzing.
Simplification is generally the privilege of privately held companies that do not have to answer to Wall Street’s quarterly earnings demands and, like Patagonia, are free to pursue goals beyond profits, such as sustainability.
The cult favourite In-N-Out Burger is a model of menu restraint, offering all of burgers, fries, shakes and drinks, as opposed to the infinite menus at McDonald’s and Burger King. And coffee shops with minimalist and welcoming vibes, such as Blank Street and Blue Mind Coffee, are gaining traction.
The newest coffee shops, ironically or not, are a lot more like Schultz’s initial sit-and-sip Starbucks than today’s corporate version.
“Less is more” has been the focus for food and beverage start-ups since the McDonald brothers got going in 1948, because startups are typically capital constrained. Once corporate growth becomes the driver, “more is more” always takes the wheel. NYTIMES
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