Starbucks at a crossroads: sales, prices, and strategy in flux

• Same-store sales have slowed, and over 70% of consumers say they plan to visit less, citing high prices
• Hundreds of stores are closing, senior executives are departing, and rivals like Dutch Bros are expanding as Starbucks’ share price falls
• Efficiency measures, higher prices and job cuts coincide with the company’s continued emphasis on nostalgia, authenticity, and its “third place” identity

STARBUCKS once symbolised modern coffee culture: a “third place” between work and home, where consumers lingered over $4 caramel macchiatos and free Wi-Fi. Today, that model faces pressure. 

The company’s performance is softening, and they have announced measures in response – hundreds of store closures and the elimination of 900 non-retail jobs. 

Same-store sales growth has slowed, and  a UBS survey found that more than 70% of consumers plan to visit less, citing high prices. The group struggling most are households earning under $100,000 – the very middle and upper-middle-class customers who once formed Starbucks’ core. As the US economy polarises between higher- and lower-income households, Starbucks is feeling the squeeze.

The average cup now costs significantly more than rivals’ offerings, a challenge in an inflationary climate where grocery coffee prices are already up 21% year-on-year.

At the same time, consumer behaviour has shifted. Drive-thru formats and at-home consumption are at record highs, even as Starbucks continues to emphasise its “third place” positioning.

Generational attitudes add another challenge. Younger consumers have no memory of Starbucks’ third place “golden era” in the 1990s and early 2000s, while some older customers associate closures and streamlined service with a loss of community feel. Viral TikTok posts from baristas about store closures with little notice have amplified worker concerns, sparking wider debate about the brand’s identity.

The company’s new CEO, Brian Niccol – who previously led Chipotle – has pledged to restore connection and culture. Yet his multimillion-dollar compensation contrasts with severance packages of 60 hours’ pay for laid-off “green apron partners” – baristas – creating a sharp public comparison for a brand that refers to its workers as “partners.”

“It’s never a good thing for companies to fight with their workforces,” says Jeffrey Pfeffer, Thomas D. Dee II Professor of Organizational Behavior, Graduate School of Business, Stanford University. “This is particularly the case for consumer-facing companies, like Starbucks.”  

“Many years ago, the CEO of SAS (the airline) wrote a book entitled Moments of Truth. He argued that it was in the very first, short interactions that customers had with companies – for example, the telephone call, the check-in experience, boarding the plane and being greeted or not that formed durable impressions. Those interactions were delivered by front-line employees.”

“My friend Howard Behar, the other Howard of Starbucks, said he could go into a closed store and tell how well it was doing because the energy, or its lack, was palpable. The customer experience is delivered by precisely the people that the company is laying off. Not the best move.”

Restructuring & rivals

The latest wave of store closures – hundreds across the United States – reflects broader restructuring. 

Some analysts have cited pandemic-era shifts: as consumers moved away from urban centres, costly leases became less viable. Alongside this, Starbucks has cut 1,100 corporate roles in February 2025 and a further 900 in September. Even the Reserve café inside its Seattle headquarters has closed, a symbolic moment for the brand and confusing to some managers at Starbucks itself, as it stands in contrast with a public focus on a “world class service.”

Executive turnover has added to the perception of transition. Deb Hall Lefevre, the chief technology officer hired by Howard Schultz, resigned earlier this year. Her department was merged under finance, which analysts say may have contributed to her departure.

Meanwhile, competitors are seizing opportunities. Chains such as Dutch Bros, 7 Brew, and Scooter’s Coffee are expanding rapidly with lower prices and speed-focused formats. Dutch Bros’ stock has risen 65% in the past year, while Starbucks’ has fallen over 9%.

Starbucks’ cost-control efforts – shorter shifts, tighter staffing, pared-down menu and higher menu prices – have drawn criticism from workers. The union Workers United, which represents more than 12,000 baristas, has used the closures to push harder for a national contract, arguing that frontline workers are central to Starbucks’ customer experience.

“Doing less and giving customers less does nothing to grow the business or, for that matter, customer loyalty,” says Jeffrey.

“One of Starbucks’ most senior executives, who at one time was on the Board of Directors, Howard Behar, left the company when during the recession of 2008 it cut employees. Starbucks’ employees for the most part are not wealthy and need their jobs to earn the money they live on. Behar thought it was unnecessary to cut people in the midst of an economic downturn just to try and maintain margins and profits, as the company was still making money, not just as much.”  

“One way of building a bond with customers is through the company’s values – think the old version of Southwest Airlines which, for many years, never had a layoff or furlough even in the cyclical airline industry. People still like to meet and interact, and they still drink coffee.  The question is: what is the experience in a Starbucks today compared to what it once was?”

A shifting identity

Starbucks’ current strategy reflects a tension between maintaining its cultural positioning and adapting to new market conditions.

The company continues to market itself around community and connection, yet cost savings and closures change the day-to-day experience in stores. Starbucks positions its drinks as affordable luxuries, but higher prices at a time of inflation have left some customers trading down or cutting back.

Analysts note that previous coffee price booms eroded loyalty, with chains losing cohorts of younger drinkers. Today’s consumers have a broader range of alternatives: energy drinks, functional beverages, and cheaper rivals. Gen Z and Alpha are exploring beverages as social currency, focused on high customisation, matcha, boba tea, and DIY recipes. 

Newer brands like Chamberlain Coffee in the US and Black Sheep Coffee in the UK are listening to this demand, and offering products that are fun, light, and – despite the brands’ names – not necessarily coffee-based.

A generation embracing drive-thrus and dashboard dining – although less out of desire, and more out of necessity – may not connect with Starbucks’ traditional emphasis on leather chairs, cosy set-ups, and café ambiance. Yet still years on from its “golden age,” the brand still retains reach and recognition few competitors can match.

Starbucks once democratised espresso for American consumers, offering not only drinks but also a new kind of experience – it was, for a long time, one-of-a-kind and Howard Schultz’ vision found its iconic place in American, and later global, consumer culture. 

Now, as rivals deliver convenience faster and cheaper on one hand, and quality of coffee and service at a lower price point on the other, the company must redefine its relevance. Whether Brian Niccol’s restructuring can achieve this will determine if Starbucks can adapt to an era shaped by inflation, new consumption habits, and shifting cultural expectations.

Coffee Intelligence

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