Starbucks nixes upcharge for milk substitutes amid disappointing earnings
Starbucks will no longer charge customers extra for nondairy milk alternatives in their lattes, macchiatos and other beverages, the company said Wednesday, part of a strategy to boost slowing sales by streamlining its menu and re-creating a more inviting coffeehouse vibe at its stores.
The change takes effect at Starbucks-owned and -operated stores in the United States and Canada on Thursday, the company said in a press release. Customers ordering drinks with nondairy substitutes can expect price reductions of more than 10%, it added.
Starbucks CEO Brian Niccol, who assumed the role in September with a mandate to reverse a trend of declining revenue, characterized the removal of the surcharge as one way to return Starbucks to its roots.
“I made a commitment that we’d get back to Starbucks, focusing on what has always set Starbucks apart – a welcoming coffeehouse where people gather and we serve the finest coffee handcrafted by our skilled baristas,” Niccol said. “This is just one of many changes we’ll make.”
Substituting nondairy alternatives such as soy, oat, almond or coconut milk “is the second-most requested customization” from customers, behind only requests for an extra shot of espresso, Starbucks said.
Customers previously complained that the extra fee for nondairy substitutes discriminated against people with lactose intolerance or other dietary restrictions. In March, three California residents filed a $5 million class-action lawsuit against Starbucks over “illegal price discrimination,” saying they paid surcharges of up to 80 cents per drink.
Starbucks’s announcement Wednesday coincided with the release of what Niccol said were “disappointing” earnings results. The coffee giant reported a net revenue of almost $9.1 billion for the July-September period, down 3% compared with the same period last year. It also reported a net revenue of more than $36.1 billion over the past year, up 1%.
Niccol said his plans to change Starbucks’s financial situation would start with baristas brewing and hand-delivering a customer’s order within 4 minutes. To do that, Starbucks must address inadequate staffing during peak rush hours, he told investors during a conference call Wednesday. Niccol also said that he would bring back self-serve condiment bars by early next year to improve service speeds and that Starbucks would simplify its “overly complex menu.”
The company will not raise prices in the next fiscal year, he added.
“We have to make it easier for our customers to get a cup of coffee,” Niccol said.