Starbucks workers initiated a walk-out on Red Cup Day, marking a turbulent period for Starbucks Corp. The company faced a series of challenges, including boycotts, staff strikes, and a lackluster holiday promotion, resulting in a substantial $10.98 billion market value decline.
While the coffee chain’s difficulties are multifaceted, encompassing a less festive Red Cup Day and geopolitical tensions affecting its cafes globally, the underlying discontent poses a significant challenge for Starbucks’ future, according to an industry analyst.
The stock market impact on Starbucks has been substantial, with complex societal issues prompting investor retreats and the longest losing streak in shares since its initial public offering in 1992.
In the 19 days following the November 16 Red Cup Day promotion, Starbucks shares dropped by 8.96 percent, translating to an almost $11 billion loss. Analysts have attributed this decline to reports of slowing sales and a tepid response to holiday season offerings.
Boycotts at the Seattle-based chain originated from sensitive geopolitical matters after a tweet from Starbucks Workers United expressed solidarity with Palestinians. Corporate responses led to further boycotts and intensified debates, forcing Starbucks to navigate its business operations amid political expressions.
Unionized workers led strikes, emphasizing the need for improved staffing, scheduling, and contract negotiations. Workers sought better conditions, particularly on high-traffic days that strain staff capacity and morale.
While the company denies any wrongdoing, it grapples with maintaining its brand reputation amid divisive global issues. Starbucks CEO Laxman Narasimhan expressed optimism about the company’s diversified channels and its ability to engage customers despite macroeconomic challenges and evolving consumer behaviors in a recent call with analysts.
Despite Starbucks facing challenges beyond the coffee bean, including labor strikes, boycotts, and reduced foot traffic, the traditionally vibrant Red Cup Day was overshadowed this year by staff walkouts at over 200 U.S. locations.
The promotion, known for gifting reusable red cups and signaling the start of the holiday season, experienced a significant decline in foot traffic. While the 2022 event set a sales record despite over 100 stores striking, it couldn’t replicate past success, with Placer.ai data indicating a 31.7 percent increase in visitors compared to the previous year’s 81 percent.
JPMorgan Chase & Co analyst John Ivankoe highlighted a “material slowing” in November, adjusting sales growth estimates downward as the holiday enthusiasm failed to match the autumn’s Pumpkin Spice Latte craze.
