Starbucks Corp's recent weeks have been fraught with turmoil, as a combination of boycotts, staff strikes, and a lukewarm holiday promotion led to a $10.98 billion decline in market value.
While the iconic coffee chain's struggles are multi-faceted, including a less cheerful Red Cup Day and global political tensions spilling into its cafes, the undercurrent of discontent signals a challenging brew for the company's future, an industry analyst has said.
The stock market has weighed heavily on Starbucks as it grapples with complex societal issues, prompting investors to retreat and driving its shares into their longest losing streak since its 1992 initial public offering. Within the span of 19 calendar-days, since its November 16 Red Cup Day promotion, shares of Starbucks have plummeted 8.96 percent, which equates to a nearly $11 billion loss, amidst analysts' reports of slowing sales and a subdued response to the holiday season's offerings.
The boycotts at the Seattle, Washington-based chain have deep roots, touching on sensitive geopolitical issues after the company found itself in hot water following a tweet from Starbucks Workers United, the union representing many of its baristas, expressing solidarity with Palestinians.
The swift corporate response sparked a series of boycotts, with calls to action resonating across social media platforms. The company's legal actions against the union have intensified the debate, leaving Starbucks to navigate its business operations amid political expression.
The strikes, led by unionized workers, highlighted an urge for improved staffing, scheduling, and bargaining over contract negotiations. The workers demand better working conditions, especially on high-traffic days that they say test the limits of staff capacity and morale.
The company denied any wrongdoing in the scenarios but faces the challenge of maintaining its brand reputation amid divisive global issues. In a recent call with analysts, Starbucks CEO Laxman Narasimhan said he remains optimistic about the company's diversified channels and its ability to engage customers despite macroeconomic challenges and changing consumer behaviors.
Newsweek has reached out to Starbucks via email for comment.
Still, the blend of challenges facing Starbucks goes beyond the bean with the combination of labor strikes, boycotts, and weak foot traffic. The typically jubilant Red Cup Day was dimmed this year by staff walkouts, which disrupted service at over 200 U.S. locations.
The promotion, known for gifting customers reusable red cups and marking the start of the holiday season, saw a steep drop in foot traffic. The event, which in 2022 generated a record sales day despite over 100 stores striking, could not replicate its past success, with Placer.ai data showing a 31.7 percent increase in visitors compared to the previous year's 81 percent.
JPMorgan Chase & Co analyst John Ivankoe noted a "material slowing" in November, adjusting sales growth estimates downward as the holiday cheer failed to match the fervor of the autumn's Pumpkin Spice Latte craze.
Update 12/06/23 6:21 a.m. ET: The headline of this story has been changed.
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Aj Fabino is a Newsweek reporter based in Chicago. His focus is reporting on Economy & Finance. Aj joined Newsweek ... Read more
