Starbucks has 'a branding issue' due to social media, says BofA's Sara Senatore

Does Howard Schultz have it mostly right in the in his prescription for writing the ship at Starbucks? I think he does. I mean Howard is obviously a visionary and so I do think you know focus on in being in the restaurants is really critical. But we’re also of the view that there is a branding issue that’s happening right now. And so making sure that, you know, a broader audience gets the message about what Starbucks offers and you know, and the experience in the restaurants is also important. Tell tell me what you mean when you say a branding issue, what are you talking about there? There’s a social media narrative that talks about Starbucks and it’s related to the Middle East and and there’s some confusion or or you know, I guess what all, what all characterizes sometimes mischaracterization of how they are positioned or what their views are. And I think that that has translated into some customers who have, you know, chosen stepped away from from Starbucks because what you saw there was a rather dramatic fall off in same store sales or same store sales growth at the very least from prior measuring periods that would suggest something beyond merely a kind of glacially paced decline in customer service or a glacially paced resistance to higher prices. Something has to have happened there that tick people off. That’s right. So that was, you know, the research that we were writing. This was exactly that point which is you don’t see this kind of you know, precipitous decline because of something that has been to your, you know, to use your words glacial or something that has been evolving. I mean the low income consumer has been under pressure. Now for the better part, probably the last two years service speeds have been something that you know they’ve been talking about. I mean for agreed agreed. I think the I happen to patronize the company and I would say that the experience using the app is kind of less good than it used to be. It seems like there are fewer employees in the stores actually preparing the beverages and and preparing the foods. And so the customer experience isn’t what it was, but but what specifically does Starbucks need to do in terms of if there has been brand damage because of position statements on on the Israel Hamas war, What do they need to do to massage or correct or reposition the company and brand so as not to alienate consumers? Well, I don’t know that they need to address that. I think it’s more about, you know, communicating what Starbucks can offer the value proposition. They have actually improved service. So throughput is improving. Maybe, you know, maybe a heavy user like yourself hasn’t noticed it just yet, but they are doing the right things. I think the, the goal here is to make sure that a broad group of people, including some people who are not, you know, perhaps not as frequent users really understand, you know exactly what the value proposition is. And I think we will see that as they brought in the availability of the mobile order and pay and as they talk more directly to consumers, you know through pricing a problem. I don’t think so. You know when you we did a pricing study in the sort of New York metro area, their pricing is right down the fairway with respect to competitors. They’ve actually taken their prices up less than a lot of their competitors. The reason that the check has been going up is because people are choosing to you know, customize or to trade up in sizes and that’s another point that we, you know, we think is important. When customers are feeling under economic pressure, the first thing they do is economize. You know, you tend to see that attach rate go down. You tend to see people you know maybe order more basic and we’re not seeing that, not not seeing a a retreat in the in the average ticket price. In other words they’re they’re going up and they’re doing it very comfortably, right. Have they been adding what what about their international business, let’s talk about that a little bit, a little bit and particularly China. So I mean China is a a struggle for a lot of companies. You know the macro economy is not particularly favorable right now. We’ve heard from a lot of consumer facing companies that it’s just difficult and and Starbucks is not alone. So it is not Starbucks specific there. In China the brand is still very strong, it’s just demand has pulled back. But we what we know about Starbucks in China is that you know again it’s it’s the top choice of you know one out of every two coffee customers. And I think what we are seeing with them is again a push to really communicate the value proposition through their digital you know assets there. But it’s it’s going to be a slog because of the macro environment.