Starbucks announced Wednesday that it’s eliminating the surcharge on milk substitutes, saving some U.S. customers greater than 10% on their drinks.

The change takes effect on November 7 and follows years of requests from customers to remove the extra fee, particularly as milk alternatives change into increasingly popular. More recently, Starbucks has seen sales decline within the U.S. as higher prices deterred casual customers whose wallets were already stretched by inflation.

“This is just one of many changes we will make to ensure a visit to Starbucks is worth it every time,” CEO Brian Niccol said in an announcement.

According to Starbucks, substitution with non-dairy milk is the second most requested customization by customers, followed by just the addition of a shot of espresso.

The change in surcharge pricing coincides with the launch of the corporate's holiday menu in addition to the discontinuation of the chain's line of olive oil-infused beverages.

Niccol joined the corporate in early September after six years as CEO Chipotle. At Starbucks, he’s tasked with leading a turnaround to revitalize the business, particularly in the house market. His early strategic focuses included changing the coffee chain's marketing, simplifying menus and fixing prices.

The surcharge for milk alternatives might be as much as 80 cents per drink in some markets. Currently, Starbucks customers can already add as much as 4 ounces of a milk substitute to hot or iced coffee or tea, cold brew and Americano drinks at no additional charge. But there are also currently surcharges for other milk drinks in the usual recipe, akin to latte macchiato.

Starbucks began serving dairy-free milk in 1997 when it added soy milk to its menus. In 2015, coconut milk hit menus across the country and the next yr almond milk hit the market. In 2021, Starbucks stores within the United States began using oat milk.

Recently, PETA has targeted Starbucks over its non-dairy surcharges, counting on stunts to attract attention to the problem. Two years ago, for instance, the actor and activist James Cromwell, known for his roles in “Succession” and “Babe,” stuck himself on the counter at a location in New York City. When Niccol joined the corporate, PETA said it might pause the campaign to provide him time to vary strategy.

In March, three lactose-intolerant women sued Starbucks in federal court, saying the surcharge discriminated against customers with allergies. The company has tried to dismiss the lawsuit. The next scheduled court date is Nov. 6, in accordance with court records.

Starbucks declined to comment on the lawsuit, citing the corporate's policy of not discussing pending litigation.

It has develop into a well-recognized sight at Starbucks Cafes: a counter filled with mobile orders, frustrated customers waiting for his or her ordered drinks and overwhelmed baristas attempting to sustain with all of it.

Solving this problem will likely be at the highest of the to-do list for brand spanking new CEO Brian Niccol, who goals to get the struggling coffee giant back heading in the right direction when he takes office on September 9.

Investors and executives cite operational problems as one reason for the chain's declining sales in recent quarters. Other reasons for the recent drop in store sales include weaker consumers, boycotts and the decline of the Starbucks brand.

Former CEO Howard Schultz, who has no official role at the corporate but stays involved, has also pointed the finger on the mobile app, saying it has develop into “the biggest Achilles heel for Starbucks,” in an episode of Podcast “Acquired” in June.

Mobile orders account for a couple of third of Starbucks' total revenue and are typically more complicated. While add-ons like cold foam or syrup are more profitable for Starbucks, they have a tendency to take up more of the baristas' time, frustrating each them and customers.

“I agree with Howard Schultz,” said Robert Byrne, senior director of consumer research at Technomic, a restaurant research firm. “It's not in the data – it's in the store. And that's the problem.”

At the top of April, current CEO Laxman Narasimhan said the corporate was struggling to fulfill demand within the mornings – and was driving away some customers with long wait times.

Schultz said he experienced the issue himself when he visited a Chicago location at 8 a.m.

“Everyone shows up, and all of a sudden we have a mosh pit, and that's not Starbucks,” Schultz said on the episode “Acquired.”

One of the important thing ways Niccol can reduce crowds at Starbucks is by making mobile ordering more efficient.

When Schultz built Starbucks into the coffee giant it’s today, he positioned it as a “third place” between work and residential. Since then, the chain has lost that repute as more customers embrace the convenience of mobile ordering and like to not linger in cafes.

“Because it’s a beverage and I often drink it in the car or on the go, it has to be incredibly convenient,” said Byrne.

However, Starbucks has not made any significant operational adjustments to arrange for this alteration in consumer behavior.

In 2017, Schultz stepped down as CEO for a second time, handing the reins to Kevin Johnson. Before joining the coffee chain as chief operating officer, Johnson was CEO of technology company Juniper Networks. Under his leadership, Starbucks invested in technology and continued to grow digital sales, however the restaurant operation was already struggling when he left the corporate.

Schultz stepped down as interim CEO when Johnson retired in 2022.

“The company did not properly anticipate the technical improvements that should have been made to prevent what happened. … The stock was at a record high, the company did not invest proactively and did not pay attention to the speed of the mobile app and its development until it was too late,” Schultz said.

Shareholders have also felt the frustration over digital ordering – and see this as a critical area that Niccol must address.

“The problem in New York City, for example, is the wait time,” says Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, which owns shares in each Starbucks and Chipotle. “And then mobile orders take priority over in-store orders.” [Niccol’s] We have to by some means reverse this so that folks spend more time in stores and spend more cash.”

The problems with mobile ordering have increased pressure on baristas. Burnout, fueled partly by the app, has inspired some employees to unionize starting in 2021.

In November of this 12 months, Starbucks Workers United, which now represents staff at about 450 of the chain's U.S. stores, urged the corporate to disable mobile ordering during ongoing promotions. (Starbucks said on the time that it was already within the technique of enabling the change.)

Digital sales is not any longer the identical albatross for Niccol’s current employer, Chipotle.

In the last quarter, 35% of sales comes from online ordersThe pandemic encouraged a sustained shift toward online ordering, with the share of digital orders skyrocketing from 18% in 2019.

When Niccol joined Chipotle in 2018, most restaurants had already arrange a second prep line for digital orders to avoid bottlenecks as online sales became increasingly essential to the corporate. That same 12 months, the corporate also began establishing drive-thru lanes just for choosing up online orders, which it calls “Chipotlanes.”

In his six and a half years at Chipotle, Niccol and his executives boosted digital sales through a wide range of promotions: favorite orders from sports stars, limited-time offers, a rewards program and the long-awaited launch of quesadillas. Quesadillas, specifically, became a digital-only option because they’d have otherwise slowed down operations.

Chipotle also tested automating the production of burrito bowls, which could be ordered through its mobile app, through a partnership with robotics company Hyphen.

Starbucks has taken steps to hurry up service and improve the barista experience.

In 2022, under Schultz's leadership, Starbucks introduced a reinvention plan that included eliminating bottlenecks with latest equipment and other measures to hurry up service.

Narasimhan has largely stuck to that strategy. Since February, the mobile app has finally shown customers the status of their orders, giving them a greater idea of ​​when their drink might be ready. And in late July, Starbucks rolled out its Siren Craft System across North America, a set of processes designed to make drinks faster and make baristas' jobs easier.

But Starbucks' problem may require more drastic measures.

For example, the rollout of the machines has been slow: About 40% of North American locations are expected to put in the brand new machines by the top of fiscal 12 months 2026. Accelerating that schedule could halve service times – as promised on the 2022 Investor Day – and reduce the burden on baristas.

“It is just not a simple task to do that, it would require time and training and investment and [capital expenditure]said Andrew Charles, analyst at TD Cowen.

“We believe Brian has tremendous credibility. If he can tell investors, 'This is the answer to our problem,' and explain why he believes that, he will get through,” Charles said.

Starbucks offered recent CEO and Chairman Brian Niccol a raise and substantial one-time bonuses to maneuver him from his previous position as CEO of Chipotle Mexican Grill.

On September 9, Niccol will officially take the reins of the struggling coffee chain. As CEO, he can be tasked with turning around the corporate's sagging sales, improving the client experience in its stores and determining what to do about its ailing China business. It's a giant undertaking – and he'll be well compensated for it.

Starbucks announced Niccol's future pay plan in a press release on Wednesday. The majority of his compensation package will consist of stock that can vest over time and is predicated on company performance goals and other metrics. If the corporate hits its targets, his pay package may very well be value as much as $116.8 million in his first yr.

Niccol will receive a base salary of $1.6 million per yr and has the chance to earn as much as $7.2 million more in money. He can also be eligible for annual stock awards valued at as much as $23 million.

And for his departure from Chipotle, Niccol will receive a bonus of $10 million in money and $75 million in stock to offset what he loses by leaving the burrito chain. The stock can be granted over a three-year period, depending on company performance and Niccol's length of service.

“Brian Niccol has proven himself to be one of the most effective leaders in our industry, delivering significant financial returns over many years,” Starbucks said in an announcement. “His compensation at Starbucks is directly tied to the performance of the company and the collective success of all of our stakeholders. We are confident in his ability to create long-term, lasting value for our partners, customers and shareholders.”

At Chipotle, Niccol earned a base salary of $1.3 million last yr and total compensation of $22.5 million. The majority of his income got here from stock grants and options, but he also received a money bonus of $5.2 million.

During his tenure at Chipotle, the stock rose 773%, increasing the worth of his total compensation.

Niccol's pay package can also be more generous than that of his ousted predecessor, Laxman Narasimhan. His base salary was $1.3 million, with potential money bonuses of as much as $5.85 million and stock awards of $13.6 million, filings show. In fiscal 2023, Narasimhan's compensation was $14.6 million, mostly from stock awards.

Unlike Narasimhan, who previously worked within the UK, Niccol doesn’t must move to Starbucks' headquarters in Seattle.

Starbucks on Tuesday reported quarterly sales The company fell in need of analysts' expectations as its cafes within the U.S. and internationally struggled with weaker demand.

Still, the outcomes weren’t as bad as investors feared, with the corporate's shares rising greater than 5 percent in prolonged trading.

Here's what the corporate reported in comparison with Wall Street expectations, based on an LSEG analyst survey:

• Earnings per share: 93 cents adjusted vs. 93 cents expected
• Revenue: $9.11 billion versus expected $9.24 billion

The coffee giant reported net income attributable to the corporate of $1.05 billion, or 93 cents per share, for the third fiscal quarter, down from $1.14 billion, or 99 cents per share, a 12 months earlier.

Excluding special items, Starbucks earned 93 cents per share.

Net sales dropped 1% to $9.11 billion. The company's like-for-like sales decreased 3% within the quarter, reflecting a 5% decline in transactions.

Customer traffic at U.S. stores fell again this quarter, down 6 percent. Sales at domestic stores fell 2 percent, driven by a rise in average sales. Last quarter, executives discussed plans to revive the flagging U.S. business, which included using discounts and latest beverages to win back customers who had left the chain.

CEO Laxman Narasimhan said Tuesday that more customers were buying the corporate's packaged coffee at grocery stores, but that a “difficult consumer environment” was impacting sales at its cafes.

Nevertheless, the corporate is already seeing initial signs in its US business, resembling the success of recent products. Its “Summer-Berry Refreshers” drinks with boba-inspired pearls broke the corporate’s record for a first-week product launch. The next quarter will even see the return of Pumpkin Spice drinks, which have been a perennial favorite since their launch greater than 20 years ago.

The company now allows customers to order and pay through its mobile app without having to take part in its rewards program. Improvements to the app also mean it will probably more accurately predict when an order will probably be ready, resulting in fewer customer complaints. In a letter posted on LinkedIn after last quarter's dismal report, former CEO Howard Schultz said the corporate needed to enhance the mobile app experience to win back customers.

Schultz shouldn’t be the one investor to be upset about Starbucks' performance recently. Activist hedge fund Elliott Management has acquired a stake in Starbucks. Narasimhan confirmed that the corporate is a shareholder in Starbucks and said talks have been constructive to date.

Outside North America, comparable-store sales fell 7 percent. In China, Starbucks' second-largest market, comparable-store sales fell 14 percent as each average amounts and transactions declined.

Starbucks is facing increased competition in China from local coffee shops which can be undercutting the coffee giant on price. But there are also encouraging signs within the country. According to Narasimhan, average day by day transactions and weekly sales in China have improved in comparison with the previous quarter.

The company is within the “early stages” of in search of strategic partnerships to speed up its growth in China, Narasimhan said. What form that partnership might take continues to be unclear.

Starbucks opened a net 526 latest stores in the course of the fiscal quarter.

The company reiterated its outlook from last quarter. It expects revenue growth within the low single-digit percentage range and earnings per share growth within the range of flat to low single-digit percentage range.

Elliott Management has acquired a major stake in coffee chain Starbucks and works with management to seek out ways to enhance the corporate's stock price. The Wall Street Journal reported on Fridayciting people aware of the matter.

Representatives for Elliott declined to comment. The company didn’t own any shares in Starbucks as of March 31, essentially the most recent disclosure date.

A Starbucks spokesman said the corporate doesn’t comment on rumors and speculation. Starbucks shares rose greater than 6 percent on Friday.

Elliott is one of the prolific activist investors and one in all the most important hedge funds on this planet. The firm has acquired quite a lot of sizeable positions in recent months, including stakes in Southwest, SoftBank, Johnson Controls And Texas Instruments.

The Journal was unable to determine the extent of Elliott's position or his specific demands, but noted that an agreement was possible.

Starbucks struggled with an activist effort from its own unions earlier this yr. That effort, which was based on an organizing effort that began in 2021, ended with the withdrawal of the Strategic Organizing Center's candidates. Talks between management and labor are ongoing.

Starbucks has faced challenges for several quarters and has passed through quite a lot of leadership changes lately. In April, the corporate reported disappointing quarterly results, with sales at its U.S. stores down 3% and customer traffic down 7%. The coffee chain also lowered its forecast for 2024.

Starbucks reported a mid-double-digit rate of incomplete orders via its mobile app and said casual customers were stopping by less often.

CEO Laxman Narasimhan, who’s currently under increased pressure, spoke of the necessity to make improvements within the stores.

Narasimhan was personally chosen by returning Starbucks CEO Howard Schultz to steer the corporate after his previous successor, Kevin Johnson, resigned. Schultz recently commented on Starbucks' challenges but said he doesn’t plan to return for a fourth term as CEO.