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Starbucks (SBUX -0.70%) continues to rebound from its pandemic shutdown, with all signs pointing to further growth for the global coffee supplier. This is where companies sometimes get lazy. They’ve done the initial work, and now it’s time to reap the rewards.
But the most successful companies know that trends change quickly, and anticipating trends can help you stay ahead of the competition. This is why executives often tout the agility of their companies, which is far from necessary in a sprawling organization with many moving parts.
Howard Schultz, the acting CEO of Starbucks, is a master at this. After leading the company from 1987 to 2000, he returned as CEO in 2008 when the company signaled stress by not making changes to meet demand during the Great Recession. He retired in 2017 but returned for a third round in 2022 and quickly realized how the company needed to reinvent itself.
During a Q1 conference call earlier this month, he released a teaser in which he told listeners that he “discovered a solid, transformative new category and platform for the company unlike anything he’s ever encountered” after how Starbucks dropped a product last week. Is this a real “transformation” for the company?
Starbucks made a big announcement on Tuesday, February 21, and it turned out to be… olive oil. Starbucks is calling its new line of drinks Oleato. Five premium products, hot and cold, will be available in Starbucks stores over the next few months.
Obviously, adding a spoonful of olive oil to your morning coffee won’t work. The beverage developers at Starbucks have come up with a precise method for adding the perfect olive oil to the right coffee blend. “The infusion is really important,” said Amy Dilger, lead beverage developer at Starbucks.
This new line reminds me of RH’s attempt at luxury. Schultz presented the collection, which also included fashion videos, at a celebrity dinner during Milan Fashion Week. There seems to be a new trend for companies to blur the lines between the products they offer and the experience they provide.
Starbucks used a variety of high quality information to launch the launch, describing the preferred olive groves in Sicily, including the unique ecological background, farming practices and specific growing locations, and the high quality Arabica coffee beans used. As delicious as it is, there are many brands involved.
Schultz, meanwhile, has repeatedly indicated that the idea for Starbucks came from a trip to Italy in 1983, and that he himself was inspired by a trip to Italy in the same way. Sentimental, yes, more than that? Let’s wait and see.
A lot of things have been going well at Starbucks lately, and this is not a new phenomenon. The chain of coffee houses first captured market share, almost single-handedly creating its own market, which has become a multi-billion dollar industry. Its next iteration was to be a “third place” where people could socialize outside of work or home. Now it has entered the next stage of development focused on the digital age, offering more convenient shopping options and drink preparation models.
The multi-stakeholder strategy starts with more diverse digital ordering options, moves to a more digital store format, including pick-up stores, and further improvements to equipment for faster service. The launch of a completely different line of drinks corresponds to the new turning point of Starbucks.
Schultz may be the right person for this latest transition, but on April 1 he will hand over the reins of CEO to Laxman Narasimhan. Lux has been the “new CEO” since October, according to Schultz, and was surprisingly quiet in his first few months on the job. Meet Starbucks. Schultz is gearing up for the next phase, and we’ll be getting to know the new top management ahead of the next earnings call.
Shareholders should always be on the lookout for new products and company announcements, especially when management sees them as the next big thing. At first glance, this shows us where the company is heading in the process of reinvention. This is important to understand as a shareholder or when considering buying shares. But even without any major changes, investors can feel confident about Starbucks’ opportunities.
Basically, I see this as a positive move as he tells investors that he is willing to think outside the box and take risks with something bold. Returning to the idea that no successful company rests on its laurels, it tells us that despite its size and history, Starbucks is still focused on innovation and improvement. Regardless of the outcome of the rollout, I applaud Starbucks for stepping up their game.
Jennifer Cybil has no positions in any of the stocks mentioned above. Motley Fool has a position at Starbucks and recommends it. The Motley Fool recommends RH and recommends the following: Starbucks April 2023 $100 short call option. Motley Fool has a disclosure policy.
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Post time: Jul-06-2023
