Why are coffee store bonuses shrinking at Starbucks?
Starbucks employees will receive only 60% of their total bonus for the fiscal year ended September 29, according to Bloomberg, after financial results fell short of expectations. Most bonuses are weighted roughly 30% individual performance and 70% company performance. US same-store sales fell 7% this quarter, a third consecutive decline.
Revenue grew less than 1% after three years of double-digit growth, and consolidated operating profit dropped about 8%. New CEO Niccol is simplifying the menu, restoring handwritten cups, and adding ceramic mugs, while headcount fell 8% year over year. Whether bonus cuts will reach coffee store workers outside the US remains undetermined.
Starbucks has just endured a disappointing fiscal year. According to Bloomberg, because the company's financial performance fell short of expectations, many employees will only receive 60% of their total bonus this year, and senior executives have also lost performance-based pay raises. U.S. same-store sales have declined for three consecutive quarters, dropping 7% this quarter. New CEO Niccol is trying to reverse the slump by simplifying the menu, restoring the handwritten cup tradition, and adding ceramic mugs, but the reality of an 8% year-over-year reduction in headcount raises the question of whether these added services will become an extra burden on store staff. Whether the shadow of shrinking bonuses will spread to domestic coffee workers remains undetermined.
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Recently, Bloomberg reported that after a dismal fiscal year, employees of this coffee chain will not receive full bonuses this year, and some will not even get performance-based pay raises.
According to people familiar with the matter, due to Starbucks' poor financial performance, many of the company's employees received only 60% of the company's total bonus for its most recent fiscal year. The person said the company's financial results for the fiscal year ended Sept. 29 were weaker than expected, dragging down overall compensation for many employees who had met their personal goals.
Another document shows that most Starbucks employees' bonuses are calculated based on an average of individual performance and company performance, with the two weighted at roughly 30% and 70%. This differs from other companies, where some split the weighting of employee bonuses equally between individual performance and corporate performance.
Over the past year, Starbucks' revenue has stagnated, growing less than 1%, while revenue growth in the previous three years was in the double digits; in addition, Starbucks' consolidated operating profit fell by about 8%. According to CNBC, Starbucks' U.S. same-store sales declined for a third consecutive quarter, falling 7% this quarter, the first same-store sales loss since being hit by the pandemic in 2020.
Affected by its dismal performance, Starbucks employees' bonuses this year will shrink by nearly 40%, and senior executives will not receive performance-based pay raises.
The reduction in employee bonuses also reflects the worrying state of Starbucks' sales performance. Due to widespread inflation, American customers have reduced their coffee consumption. At the same time, poor service quality at stores has drawn widespread complaints from many customers, who complain about excessively long wait times for picking up orders, inaccurate order information, and reduced product offerings. These poor experiences have lowered users' desire to buy.
For this reason, new CEO Niccol is trying to turn the situation around through various new policies, such as planning to continue investing in technology and work systems, removing complex-to-make products, and simplifying the menu, in order to optimize beverage production, ease the burden on baristas who constantly serve customers during peak hours, and enable them to complete order preparation more quickly.
In addition to improving the situations customers complain about, the CEO also hopes to make Starbucks a comfortable third place, so he intends to restore the handwritten cup tradition that has gradually disappeared since 2012, add ceramic mugs and comfortable seating to stores, and restore condiment stations, among other things, to improve store service quality and make more people willing to linger there briefly.
However, on Nov. 20, a document Starbucks submitted to the U.S. Securities and Exchange Commission showed that, as of Sept. 29 this year, the number of employees working in the company's coffee stores had decreased by 8% compared with last year, while U.S. stores had a net increase of 513. In response, some people believe Starbucks should perhaps pay attention to stores' staffing needs rather than adding some additional services with little effect, turning them into a work burden for store staff.
It is worth noting that although Bloomberg's report on Starbucks employees' shrinking bonuses has been confirmed by other media outlets such as Fortune, there is not yet definitive news on whether the impact will spread to domestic workers on the other side of the ocean.
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