Starbucks to push AI with new ‘Deep Brew’ initiative
Cold beverages, labor investments and new machine learning solutions drove positive results for Starbucks locations in the U.S., a segment that saw its best performance in two years.
“We are pushing on the right elements,” CEO Kevin Johnson told investors during a Wednesday afternoon conference call.
The company’s Americas and U.S. segment saw same-store sales grow 6%. The uptick was driven by a 3% increase in average ticket and a 3% increase in transactions. That compared to a 1% decline in transactions in the fourth quarter of 2018.
Roz Brewer, group president and chief operating officer, said consumers are responding to the brand’s pipeline of cold beverages such as flavored iced teas, nitro cold brew and Refreshers. In 2018, Starbucks set out to limit stunt drinks (think Unicorn frappes) and add more relevant beverages that would drive frequency especially in the afternoon. Brewer said occasional customers attracted to the chain’s happy hour and beverages are making return visits in the afternoon, and driving up check averages.
“We are seeing traffic growth across all day parts and we intend to build on this momentum in the year ahead,” Johnson said.
Consumers are also responding to improvements made to the in-store experience, which has led to high customer satisfaction scores, Johnson said. Specifically, the company has shored up staffing and deployed machine learning technologies, which are both working to improve service.
The rewards program, which increased 15% to 17.6 million members, is also driving visits.
“The brand is healthy and strong and growing,” Johnson said.
In China, Starbucks opened Starbucks Now in Beijing, an express format that focuses on mobile order and pay and delivery customers. The new format is showing “encouraging results,” prompting the brand to plan more units in “top tier” China cities, Johnson said.
In 2020, Johnson said the company will focus on its new “Deep Brew” initiative, machine learning technologies designed to optimize store operations by automating tasks such as inventory and staff scheduling.
Last week in a LinkedIn article, the CEO said the company is currently using AI to personalize customer offers and recommendations on the Starbucks app. Eventually, AI will be used to predict staffing needs, he wrote in the Oct. 23 post.
On the conference call, Johnson said AI-powered solutions will be “a key differentiator” for the company.
“We plan to leverage Deep Brew in ways that free up our partners so that they can spend more time connecting with customers,” he said on the conference call.
Total revenue for the quarter increased 7% to $6.75 billion. Net income of $802.9 million, or 67 cents per share, increased from $755.8 million, or 56 cents per share, for the same quarter, last year.
In the U.S., cafe locations increased 3% to 15,049 units.
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