In a push to improve customer experience, baristas at Coffee chain Starbucks (SBUX) will now ask customers if they want their drinks “for here” or “to go,” and those who choose to stay will receive their drinks in ceramic mugs. The company is also reintroducing its condiment bar and offering unlimited free refills of iced or hot coffee to customers who make a purchase. Additionally, baristas are being encouraged to add personal touches, such as handwritten notes on cups, to make the experience feel more premium.
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The changes are part of CEO Brian Niccol’s plan to revamp the Starbucks experience and persuade customers to linger in stores. Niccol, who joined the company in September, is trying to create a more premium experience that justifies the prices of Starbucks’ drinks. Details like ceramic mugs, carefully crafted drinks, and personalized services are designed to make customers feel like they’re getting a high-quality experience.
By focusing on the in-store experience, Niccol hopes to reverse the decline in sales that Starbucks experienced last year. Interestingly, Eric Gonzalez, a four-star analyst at KeyBanc Capital Markets, said that although Starbucks has an affordability problem, it could potentially improve the value perception of its products by making the experience feel more premium. Indeed, he noted that a ceramic mug could make consumers feel good about themselves when sipping it in the coffeehouse. Currently, Gonzalez has a Hold rating on SBUX stock with no price target assigned.
Is Starbucks a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 13 Buys, six Holds, and three Sells assigned in the past three months, as indicated by the graphic below. After a 9% decline in its share price over the past year, the average SBUX price target of $106.40 per share implies 6.8% upside potential.
