Starbucks Becomes the Target of Activist Campaign

Maybe this is the espresso jolt Starbucks needed.

Activist investing firm Elliott Management has taken a significant stake in the behemoth coffee chain, according to a Wall Street Journal report, and has already begun pushing for strategic changes. Amid weak results, the company has been forced to slash its outlook twice so far this year — which means a turnaround effort may be a tall order. Or, wait. Do we mean venti order? Or grande? We can never keep it straight…

Starburst

Starbucks is a victim of its own success. At least, if you ask Starbucks. As the world transitioned out of the pandemic, the coffee chain’s to-go online ordering business took flight, and became the growth engine for the entire empire. But the success kneecapped stores and employees, with orders pouring in faster than they can be filled — especially as Starbies demand increasingly specific drinks. 

After all, making a Iced Caramel Macchiato with almond milk, two pumps of vanilla syrup, one pump of toffee nut syrup, extra foam, and light ice isn’t exactly simple, and it’s starting to have a material impact:

• In its second-quarter earnings report in April, Starbucks said that the rate of incomplete mobile orders had risen into the mid-teens.
• The company also said that occasional customers were visiting less often, with traffic dropping 7%. Overall, US same-store sales fell 3% year-over-year.

Coffee Chorus: The activists Elliott, who have in previous efforts successfully pushed for shake-ups at firms like Salesforce and Southwest Airlines, aren’t the only ones breathing down the necks of Starbucks’ C-suite. Former CEO Howard Schultz — who is no longer on the company’s board, but is listed as chairman emeritus and holds 2% stake in the company — posted an open letter to shareholders on LinkedIn earlier this year in which he criticized replacement CEO Laxman Narasimhan and company leaders. We’re guessing he didn’t get his coffee that day…