The fall of a giant: will we witness Starbucks' demise?

The beverage behemoth that is Starbucks has recently seen a nosedive in sales.

And it probably has something to do with the fact that, over the last few years, it's transitioned from a traditional sit-down café to a place where people order on their phone, grab their drink from the counter, and dash.

A place where people used to spend hours reading, working, and studying has become a grab and go.

Under Howard Schultz, Starbucks’ long-time leader, cafés were positioned as a 'third place' between work and home.

Everything about the interior was designed to make you stay, relax and socialise in the cosy and inviting environment.

The plush armchairs, the handwritten names, even if spelt wrong, were all part of the charm.

'If you look at the landscape of retail and restaurants in America, there is such a fracturing of places where people meet,' Schultz once said in a 1995 industry publication about Starbucks. 'There’s nowhere for people to go. So, we created a place where people can feel comfortable.'

So, how did something so integral to the brand's identity shift into something so far away from its origin?

Well as the business transformed, Starbucks struggled to maintain its position as the third place. 70% of sales across its 9,500 stores in the US are attributed to online and drive-through orders.

The company changed its sit-down model to account for such numbers. It also expanded its product range. And, at the same time, was recovering from pandemic issues. All these factors eventually led to the shutting down of many of the cafés with indoor seating.

The shift is understandable within the context. But it's still unfortunate, as along the way Starbucks has not been able to retain what people originally found so appealing.

It's giving fast-food. Not cute, cosy coffee shop.

And it shows: Starbucks comparable transactions were down 10% in the US during Q4 of 2024. Traffic declines have exacerbated since Q3, where they fell 6%.

'Our fourth quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth and that's exactly what we are doing with our "Back to Starbucks" plan,' the company said in a preliminary Q4 report.

Starbucks CEO, Brian Niccol wants to make the chain 'a coffee shop again,' according to CNN.

But is that alone enough to save the company from turmoil?

It’s hard to say, especially when another, deeper issue runs alongside Starbucks positioning.

The coffee house also battles a reputation issue, after consumer backlash due to the corporation's alleged links to Israel and helping to fund the genocide in Gaza.

This resulted in global boycotts of the brand over the last 12 months, which is said to have contributed to the decline in sales seen today.

Starbucks is a much-loved brand rooted deeply in American culture.

But the scenario at hand goes to show you can’t bank on love forever – and straying from your core identity is basically a brand's death sentence, no matter how large.

Clearly feeling the heat, in September the coffee chain brought in Niccol, Chipotle Chief Exec to transform the business, and appointed WPP as its new agency of record.

Only time will tell whether such a major business transformation will be enough to save this giant sinking ship.

But, either way, it will be a goldmine of learnings for us.

-Sophie, Writer