Starbucks Gives a Glimpse of Artificial Intelligence’s Increasing Role
In a Q2 21 earnings call with analysts, Starbucks President and CEO Kevin Johnson riffed on the increasing role that artificial intelligence is playing in the growth and success of Starbucks, an initiative called Deep Brew.
Deep Brew drives the pandemic dashboard used by Starbucks’ retail leaders across the U.S. One way the coffee retailer is using AI and predictive analytics is to monitor vaccine progress. This work in AI is providing Starbucks the underlying predictive models, “enabling us to fuel the great human reconnection by freeing up partners to do what they do best, connect with customers and deliver a world-class customer experience,” said Johnson.
Starbucks continues to leverage its most loyal customers: Starbucks Rewards tops 22.9 million active members amid “a full sales recovery in the U.S.,” said Johnson. More than half of Starbucks’ U.S. sales come from Starbucks Rewards Members.
A Shot in the Arm
As vaccination efforts gain steam around the globe, Starbucks is using the technology in international markets as well. "We're now using our Deep Brew AI technology to start to monitor and look at the vaccination progress of every country around the world and use predictive analytics to give us a view and correlation to how that's going to pace the recovery and the acceleration of our growth in international business," explained Johnson.
Demand for Drive-Thru
During the early days of the COVID-19 pandemic, QSRs and fast casual brands of all sizes saw increased demand for drive-thru. Many brands updated their store development plans including Taco Bell’s new store design that doubles down on drive-thru and Taco Bell Plans Minnesota Outpost with Four Drive-Thru Lanes. Not to be outdone, Shake Shack is adding drive-thrus to its fast casual concept, to name a few. And then there’s Starbucks' transformation. Demand for drive-thru has been growing at Starbucks.
Last June Starbucks announced it was closing 400 stores and is fast-tracking off-prem formats -- pickup-only stores, curbside and drive-thru-- to meet consumers’ evolving needs of convenience, connection and personalization offered through a digital experience.
It’s a move that is paying off for the coffee retailer. “The drive-thru channel has improved quarter over quarter since the onset of the pandemic,” said Johnson. "We continue to invest in several initiatives to increase the throughput of our drive-thrus, including updated operational standards, handheld order devices, more efficient warming ovens and accelerated deployment of our more efficient Mastrena espresso machines.”
Speed of Service
In Q2 out-the-window drove more than 50% of net sales, increasing more than 10% from pre-pandemic levels, “unlocking capacity and enhancing the customer experience by reducing wait times, ultimately fueling our business recovery,” he added.
Starbucks’ off-prem plan (referred to as the Americas Trade Area Transformation) “has positioned us extremely well for the future,” said Johnson. “We called this early, and in just nine months we have already completed 70% of the strategic store closures, clearing the way for the development of new, innovative and more efficient retail store formats over time,” Johnson said.
“The plan leverages new store formats like Starbucks Pickup in dense metro areas … and also enables us to balance continued growth in high volume and high-margin locations, primarily cafes with drive-thrus.”