Starbucks Cuts Factory Days to 5, Slashes Costs Amid U.S. Demand Decline

Starbucks (SBUX.US) has announced a significant adjustment to its production schedule in the United States, aiming to cut costs and reallocate funds to other areas of the business. Starting from January, the company will reduce the operating days of five of its roasting and packaging factories from seven days a week to five. This decision comes as the company faces a decline in demand for its premium beverages in the U.S. market.

The five factories affected by this change are located in Georgia, South Carolina, Pennsylvania, Nevada, and Washington. These facilities not only supply Starbucks' retail stores but also produce packaged coffee for sale in supermarkets and other retail outlets. The company has determined that the current demand levels no longer necessitate seven-day-a-week operations for these factories.

Starbucks' Chief Executive Officer, Lazzar, who is set to complete his first year in the role in less than a month, has been actively implementing cost-cutting measures to address the sluggish demand. In addition to reducing production days, the company has also set a 2% salary increase cap for all salaried employees and has laid off some headquarters staff as part of its business restructuring plan.

The company is determined to reverse the trend of declining same-store sales, which have been on a downward trajectory for six consecutive quarters. By reducing production days and cutting costs, Starbucks aims to free up resources for reinvestment in its stores and other strategic initiatives. This move is part of a broader effort to enhance operational efficiency and better align production with current market demand.

This strategic adjustment is a clear indication of Starbucks' commitment to adapting to changing market conditions. By reducing production days, the company can better manage its costs and focus on areas that will drive growth and improve customer satisfaction. This move also highlights the company's proactive approach to addressing challenges in the market and ensuring long-term sustainability.