NEW YORK (NYTIMES) – Customers flocking to Starbucks and ordering Iced Shaken Espressos helped propel the coffee giant’s revenue to a record US$8.2 billion (S$11.3 billion) in the latest quarter, the company said on Tuesday (Aug 2).
And while McDonald’s and other restaurants and food companies that have reported earnings over the last couple of weeks have noted that they were beginning to see customers slowing their spending or trading down to cheaper items on their menus, executives at Starbucks said its customers – and specifically the Generation Z cohort – showed no signs of reducing their intake of Iced Cinnamon Dolce Latte anytime soon.
Howard Schultz, Starbucks’ founder and interim CEO, said cold beverages, which accounted for 75 per cent of its beverage sales in the quarter, were a Gen Z favorite because young consumers like to customize and make the drink their own, and then post pictures on social media.
“We’re at the early stages with cold beverages in the modifiers and customization, and that gives us a competitive advantage,” Mr Schultz said. And he predicted continued profitability as more employees returned to offices and picked up their morning coffees on the way.
Still, increased costs related to higher commodity prices and wages as well as Covid-related shutdowns and restrictions in China put a damper on Starbucks’ overall earnings. Operating income fell 13 per cent in the April-to-June quarter to US$1.3 billion from US$1.5 billion a year earlier.
Mr Schultz, who took over the reins of Starbucks for the third time in April, most recently from Kevin Johnson, said he and his team had spent much of the last four months visiting Starbucks stores all over the world and meeting with employees. Those meetings helped shape what the company in July deemed its “reinvention.”
Mr Schultz also said that the company was interviewing potential candidates for the top job and that he was likely to stay on “as long as necessary” to make sure the candidate had a seamless start. He said he would then make a transition to the board of directors to “mentor and help” the next CEO.