Starbucks (NASDAQ: SBUX) is planning to completely restructure its organizational apparatus to revive stagnant sales and impress investors. Part of this restructuring will entail corporate layoffs at the highest levels.
"We must increase the velocity of innovation that is relevant to our customers, inspires our partners, and is meaningful to our business," Chief Executive Officer Kevin Johnson said in a memo to employees. "To accomplish this, we are going to make some significant changes to how we work as leaders in all areas of the company."
The world's largest coffee retailer is facing a slew of problems, including a cooling US market and heavy competition from rivals, all while undertaking a massive expansion project in China.
"There will be some job losses, some role expansions, and redeployments," a company spokeswoman said.
Starbucks has experienced two high profile talent losses since June, including Howard Schultz, its former chief executive officer, whose departure surprised investors and led to concerns about how the company would evolve after nearly four decades of Schultz's persisting involvement.
The leadership and organizational changes will begin this week and carry on into November, Johnson said. He sent the email after the company held its quarterly town hall meeting in Seattle last week. Starbucks had about 10,000 employees in US support facilities, store development, and roasting, manufacturing, warehousing and distribution operations as of Oct. 1, 2017.
Starbucks must also contend with increasing competition from a number of new regional chains specializing in products that were once considered niche, such as cappuccinos. To combat this, Starbucks wants to speed the arrival of new menu items at its more than 28,000 cafes. It's also pushing innovation in other areas, including automating its back-of-store inventory system to reduce waste and let staff spend more time with customers. In addition to this, Starbucks has added delivery services to its increasing list of alterations. It began working with UberEats in more than 100 locations in the Miami area. It's also teamed up with Alibaba (NYSE: BABA) to offer the service in its rapidly growing Chinese market this year.
Starbucks shares have been flat this year, compared with an 18% gain for the S&P 500 Consumer Discretionary Index over the same period. The shift towards more organic and specialized forms of coffee has been a major contributor to this revenue downturn. Starbucks is finding itself in a position in which it must innovate.
"We have opportunities to better prioritize and move faster," Johnson said. "We must knock down the barriers in our decision making."