| By Andy Swan
Starbucks (SBUX) has lost its edge. App usage has been declining for months now… 
And the results speak for themselves: Starbucks failed to stack up to (lowered) expectations in fiscal year 2024. Global comparable sales fell 2% for the full year and an even steeper 7% for the fourth fiscal quarter. SBUX shares are flat year over year, with any hope for a recovery now pinned on former Chipotle Mexican Grill (CMG) CEO Brian Niccol to spark a turnaround. Some investors are betting on Niccol's track record to save Starbucks. But we’re not so convinced. Starbucks Faces 3 Big Problems Starbucks has three massive problems to overcome – and these won’t be easy fixes, even for a seasoned vet like Niccol. No. 1: The complicated menu remains a major issue. Starbucks claims it offers 170,000 drink combinations, but many customers believe the number is much higher. This complexity slows service and frustrates both employees and customers. Niccol has promised to streamline Starbucks’s menu, aiming to get back to making drinks in less than four minutes. “We have to make it easier for our customers to get a cup of coffee,” he noted on the company’s last earnings call. In November, he discontinued the unpopular olive oil-infused Oleato concoction and stopped up-charging for non-dairy milk options. Starting this year, Starbucks will also roll out condiment bars in its locations so customers can self-serve once again. No. 2: Lasting political controversies have also tarnished the brand. From its bathroom policy for homeless people to worker strikes and an incident involving coffee provided to the Israeli army, Starbucks has alienated some of its customer base. The company’s latest strike came to a head during the holidays, closing nearly 50 stores in major cities, so these issues are still fresh in the minds of both employees and consumers. No. 3: While Starbucks struggles, competitors are creeping in. Luckin Coffee surpassed Starbucks in China by store count in 2022 and by sales in 2023. It’s now planning to expand into U.S. markets, offering $2–$3 coffee in areas with high Chinese populations and tourist traffic. Dutch Bros (BROS), another competitor, is gaining ground with its drive-thru model, energy drinks, and simple menu. And the stock is on a tear – surging 60% since we first featured it here in Derby City Daily in September. (Congrats if you followed our lead!) Dutch Bros currently serves customers in the West and South but has big plans to expand rapidly across the U.S., launching 38 new locations across 11 states in the third quarter of 2024. While Starbucks’ revenue declines (-3% year over year), this smaller, more agile competitor is gaining momentum, recording impressive 28% year-over-year revenue growth. The biggest issue of all: Despite Niccol’s efforts, Starbucks is losing consumer interest. Web traffic, our best gauge of brand interest, is down 21% year over year – and active app users declined, even during the holiday season. 
Loyal customers may keep sales steady, but occasional customers are turning to competitors. And we can see this playing out in real time, thanks to LikeFolio data – just look at the stark contrast between SBUX and BROS web traffic growth above. Not to mention the sharp divergence in stock price between the former giant, SBUX, and its up-and-coming competition. 
Source: TradingView Bottom line: Starbucks’s recovery depends on Niccol’s ability to fix its issues – take him out of the equation, and this wouldn’t even be a conversation. For now, it’s too early to call SBUX a safe bet. Until next time, 
Andy Swan
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