Starbucks, the once-dominant coffee juggernaut, is cutting corporate holiday bonuses by a staggering 40%, capping off a year of financial turbulence and customer dissatisfaction. The Seattle-based company, already under fire for its political stances and sky-high prices, now finds itself grappling with its weakest performance since the pandemic-era lockdowns of 2020.
Holiday bonuses, traditionally a bright spot for corporate employees, will now leave a bitter taste for many at Starbucks headquarters. According to reports, corporate workers who typically receive their payouts in December will see just 60% of their expected bonus amounts, even if they hit personal performance goals. The reason? Starbucks’ dismal earnings.
For a brand once synonymous with upward momentum, the numbers paint a grim picture. Revenue barely budged, up less than 1% for the fiscal year ending September 29. Operating income dropped by 8%, and global same-store sales fell 2%—a rare decline that the company hasn’t seen since the pandemic crippled the restaurant industry. These results reflect an alarming trend: fewer customers are willing to pay for overpriced lattes and frappuccinos, especially amid persistent inflation and economic uncertainty.
To add to its woes, Starbucks faces mounting backlash over its perceived positions on political issues, most recently the conflict in Gaza. Boycotts and criticism have only deepened the brand’s struggles, as alienated customers seek out less politicized alternatives.
Newly appointed CEO Brian Niccol, who took the reins in September, acknowledges the uphill battle. “It is clear we need to fundamentally change our strategy to win back customers,” Niccol said during the latest earnings call. “We have a clear plan and are moving quickly to return Starbucks to growth.”
Niccol’s plan includes revamping Starbucks locations to recapture the chain’s early appeal as a “third place” for customers—a welcoming spot between work and home. The strategy involves hiring more baristas to speed up service and cutting down notoriously long wait times, which have been a significant customer complaint.
But will it be enough? Starbucks’ challenges are deeper than outdated store layouts or slow service. The brand’s aggressive price hikes have alienated many loyal customers, who balk at paying premium prices for what used to feel like affordable indulgences.
Meanwhile, corporate morale isn’t likely to improve with the bonus cuts. Rank-and-file employees will see reduced payouts, while senior executives—whose bonuses are more closely tied to company performance—will bear the brunt of the reductions. Even more telling, senior leaders won’t be eligible for merit raises this year, signaling broader cost-cutting measures.
Starbucks’ stock has risen 7.5% in 2023, but that’s a weak showing compared to the S&P 500’s 27% growth in the same period. Once a Wall Street darling, Starbucks now seems caught between its woke branding and a disenchanted customer base.
As holiday bells ring and Hallmark movies dominate TV screens, Starbucks might want to focus less on divisive politics and more on delivering what made it a global favorite in the first place: great coffee, fast service, and a politics-free escape. Whether Niccol’s turnaround plan can deliver remains to be seen, but one thing is clear: the company’s challenges are steep, and its customers’ patience is wearing thin.
