Starbucks to Cut Costs by Reducing US Coffee Production

Starbucks plans to reduce weekly production by two days at its US roasting and packaging facilities to cut costs. The company will adopt a five-day production schedule from seven days at five US plants starting in January, aiming to minimize losses due to the ongoing pandemic and subsequent decline in consumer spending. This move is expected to help the coffee chain mitigate the economic impact of the pandemic.

Starbucks (NASDAQ: SBUX) has announced a significant cost-cutting measure, reducing weekly production at its five U.S. roasting and packaging facilities by two days. Starting in January, the company will operate these facilities on a five-day schedule instead of the previous seven-day week. This move is part of the company's ongoing efforts to manage costs and mitigate the economic impact of the ongoing pandemic and subsequent decline in consumer spending.

The decision to reduce production days follows a series of cost-cutting measures implemented under CEO Brian Niccol's leadership. These measures include job reductions, stricter dress codes, and executive incentives tied to cost control. Additionally, Starbucks has been working on improving service wait times and enhancing the atmosphere in its locations. The company has also implemented a 2% salary increase for all salaried employees in North America, although raises for these employees were previously determined by managers [1].

The five plants located in Georgia, South Carolina, Pennsylvania, Nevada, and Washington state will adopt the new five-day schedule. This reduction in production days will help the company pay for upgrades elsewhere and align with the current demand for its beverages. The company has been struggling with weak demand in the United States, particularly for its pricey offerings.

Starbucks' cost-cutting measures come as the company continues to negotiate with unionized baristas. In April, union delegates rejected the coffee chain's proposal that included guaranteed annual raises of at least 2%. The Workers United union stated that the offer lacked changes to economic benefits such as healthcare and did not provide an immediate pay increase [1].

This strategic shift in production schedules is expected to help Starbucks minimize losses and adapt to the current economic climate. The company's focus on cost management and operational efficiency underscores its commitment to maintaining financial stability amidst challenging market conditions.

References:
[1] https://www.investing.com/news/stock-market-news/starbucks-to-give-2-raise-to-salaried-north-american-staff-93CH-4198494
[2] https://finance.yahoo.com/news/starbucks-cut-production-five-day-214826878.html