Starbucks is pulling back on promotions and discounts, an early move by Brian Niccol, the new chief executive officer, to reposition the coffee chain after a turbulent year. Since Niccol was tapped in August to take the helm, Starbucks has quietly reduced the frenzy of discounts it had offered for long stretches of the past year, according to company executives and baristas.
Starbucks and other restaurant chains have increasingly leaned on discounts this year to woo back customers after years of raising menu prices. Executives said the increases were necessary to cover higher costs and wages, but inflation-fatigued diners—especially lower-income consumers—have pulled back on eating out, prompting chains to promote their value and unfurl deals.
Starbucks is pivoting away from discounts as Niccol emphasizes the company’s hallmarks of selling handcrafted, premium coffee. Starbucks for years eschewed discounting and promotions, but recently stepped up offers through its app as its cafe traffic sagged and customers complained of high prices and long wait times.
The company in September offered extra loyalty points on Tuesdays and deals on several drink purchases on Saturdays, downshifting from buy one get one, 50% off and other deals that spanned many months earlier this year.
Starbucks isn’t planning to run broad offers during the holiday season, and instead aims to promote seasonal drinks through advertising, the company said during an early-October strategy update for store leaders.
Niccol, who took over at Starbucks about a month ago, is looking to reset the chain after a rocky year. Starbucks has experienced reduced business in the U.S. and China, and the company has lowered its sales expectations twice this year. Activist shareholders piled into Starbucks stock, and the company’s board terminated Laxman Narasimhan, the previous CEO, in August. He was succeeded by Niccol, the former chief executive of Chipotle Mexican Grill, who ushered in a turnaround there.
Niccol is quickly making his mark at Starbucks, presiding over a series of leadership changes and seeking to improve the in-cafe experience for customers. Since his tenure began, at least three Starbucks executives have exited from the company, including leaders of the company’s North America and coffee divisions. A global chief merchant and product officer—a position that Narasimhan recently created and filled—also departed, with Starbucks declining to backfill the role.
“The strategy is, simply put, just making a couple powerful choices, and then we’ve got to execute like crazy,” Niccol said in September during an internal company forum, a replay of which was viewed by The Wall Street Journal. The changes must make the brand better, and leaders will evaluate the impact on customers and workers, he said.
Niccol said operations at a company can go haywire without a well thought out process communicated to employees, drawing applause from Starbucks employees in attendance.
Starbucks long championed itself as a premium brand that did little discounting. Howard Schultz, the former CEO who built Starbucks into a global company, previously said the chain needed to be careful with promotions.
These days a grande pumpkin spice latte in Chicago can cost $6.25, and nearly $10 with extra syrups and flavors.
Late last year, as the company’s cafe traffic slowed, Starbucks stepped up its offers and deals, directed at loyalty-program members. The company ran BOGOs, 50% offers, increased loyalty points and other offers for about half the month of May, according to documents viewed by The Wall Street Journal. In June, Starbucks began offering bundles of coffee and breakfast food starting at $5.
The company’s U.S. same-store sales improved slightly in the quarter ended in June compared with the previous quarter, but remained down versus the prior-year period. Narasimhan and other executives said the promotions had helped bring back some lapsed customers, though Starbucks needed to do more.
Some baristas and store managers said the flood of promotions at times made it hard to predict customer traffic and allocate enough staff. In the strategy update this month, Starbucks North America President Sara Trilling said the chain had scaled back offers and wanted baristas to have more time to deliver prompt service and craft orders accurately.
“We know the broad Starbucks rewards offers that we’ve been doing previously had been hard,” Trilling said.
Niccol told employees at the internal forum in September that he had spent recent weeks visiting U.S. stores and talking to workers and customers about the Starbucks brand, and is focusing on serving quality coffee in a welcoming environment.
“We will be the community coffeehouse known for great coffee,” he said.
Write to Heather Haddon at heather.haddon@wsj.com