Brian Niccol is the New Howard Schultz

Starbucks is going the way of Chipotle as Niccol brings his operational superiority to the coffee giant

The frontal cortex of the brain, which is charged with rational thought and information processing, can make more sense of the world, given enough time to think it through, than the senses themselves can make sense of the world.

—Nick Sleep, co-founder and principal of the Nomad Partnership

The following deep dive is my first attempt at sharing my thoughts on an investment thesis. Full disclosure: I own 150 shares and a deep ITM call of Starbucks. Including the notional value of the assigned call, the position represents 1.3% of my net worth. The following deep dive has not swayed me to add to my current position just yet. However, I do believe that I will in the coming months as I continue tracking business progress.

You will notice that, unlike most analysts, I do not rely much on numbers. I believe qualitative factors are the most important determinant of business success. Certain figures communicate the probability of success—namely ROIC and FCF/share growth—but they are measured by what has already passed rather than the future, which dictates shareholder returns.

The Starbucks brand draws inspiration from many successful businesses. But at its core is a passion for the corner café. Brian Niccol is taking Starbucks back to Italy.

It’s likely been over 30 years since anyone thought of Starbucks as a local coffee chain. The coffee giant has dominated the industry for so long that it’s difficult to imagine that there’s ever been a need for a turnaround. Yet this is arguably its third since its founder, Howard Schultz, took Starbucks public in 1992. Only this time, Howard isn’t coming back to save the day, as he has several times since attempting to retire.

Luckily, Starbucks was able to poach Brian Niccol from Chipotle. One can see this as a chance for Niccol to cement his legacy as one of the best CEOs in history, and perhaps even a turnaround specialist. Chipotle too was suffering when he stepped into the CEO role, their brand damaged by an outbreak of E-coli that sent more than 50 customers running for the loo.

Niccol did far more than repair the brand’s image. He turned the Chipotle burrito bar into a Japanese assembly line, with kaizen-like efficiencies driving straight to the bottom line. By the time he was done, robots had taken over the job of scooping avocado. This all may sound ruthless and Muskian. While this is certainly true—and gloriously so—Niccol’s biggest strengths as a leader lie in branding and image. He did exactly what Chipotle needed of him, instilling an obsession with customer satisfaction that would make Jeff Bezos blush. We’re seeing the same now with Starbucks. On the one hand, Niccol has wiped out the entire C-Suite with one wave of his wand, yet on the other he’s speaking in avuncular tones about the importance of taking Starbucks “Back to Coffee,” investing in quality, and making it the best retail job in the world—flashes of the Costco algorithm.

Tariffs Don’t Matter

You might be tired of hearing this, but it’s worth taking a moment to note what kind of investor is repeating it. When I look around, I tend to see long-term, composed investors noting that, over the long term, tariffs will play no bigger role than world wars, credit crises, or bubbles. The history of the market shows that at worst we will see a period of relative underperformance, and this certainly doesn’t require that your holdings underperform as well.

We’re not that far removed from one of the worst decades in the history of the stock market. The 2000s were brutal. While neither was quite as bad as Roaring ’20s market peak, the dotcom and housing bubbles and ensuing crashes ate up 14 years of would-be index returns (aside from reinvested dividends). But this was actually an anomaly. The media—both mainstream and social—would have you believe that these phenomena are 100X more common than they actually are.

The same mentality should apply to Starbucks as a business. Tariffs will affect them about the same as any other big-box coffee retailer. In fact, since most of their beans are premium, they will largely avoid Vietnam, where Robusta beans grow. Moreover, investors who focus on macro are inherently thinking short-term. Policies come and go. Starbucks will be here for the rest of our lives, or until humans stop drinking coffee. Given that we’ve been doing so for thousands of years, I doubt we will meet this end anytime soon.

What led to this point?

Starbucks has compounded their free cash flow at 15.25% since 2002. If you backtrack a few years to 2021, FCF/share CAGR raises to 19.67%, the blame for which recent period of underperformance we will soon lay at the feet of the previous CEO. The per-share numbers are even better, as Starbucks has bought back a significant amount of stock since 2002. From then to now FCF/share has compounded at 16.9%, and if you measure through 2021 the numbers move up to 22.57%—likely closer to 25% when factoring in dividends.

The numbers through 2024 still offer shareholders a phenomenal result. But a difference of about 5.5% over the course of decades is absolutely massive, so there’s certainly cause for concern. For this we can thank Laxman Narasimhan, the latest Starbucks CEO to trash a Howard Schultz turnaround. Laxman didn’t even make it a full year before Howard started tweeting angrily, and rightfully so. Laxman was responsible for the sort of rent-seeking, lazy management strategy that saw the recent ouster of John Donahoe at Nike. Rather than continuing to invest in and nourish the brand for the long haul, Laxman exploited customers by raising prices, taxing nondairy milks, and making no improvements to a deteriorating customer experience.

Laxman drove to his end gradually, then all at once. His poor performance set the stage for an even poorer choice of unintelligent public comments. First, he stated on the record that he refused to work beyond 6PM because at this arbitrary point in the day it was family time. While that may win the hearts and minds of the employees at the local hardware shop, it’s unclear how he thought this was acceptable to say, much more to actually believe, with a salary and stock options hundreds of times larger than those of his employees.

The nail in the coffin came after a brutal Q2 call, when he tried to put a positive spin on a quarter that a cognitively-delayed toddler could easily discern was a shitshow. The next day, he went on CNBC to face Jim “the inverse” Cramer. Typically good for a few laughs or nothing at all, Cramer lived up to the reputation from his hedge fund days by grilling Laxman in front of millions of viewers. Despite achieving nothing positive on the earnings call, with the stock gapping down 16% and continuing to dig deeper than an industrial drill bit, Laxman still thought the best course of action would be to drag out the loom and continue spinning up an alternate universe in which the company hadn’t actually just shit the bed.

The clip is must-see TV. Call Cramer what you will, but he’s not a stupid man. He lit Laxman up like a Christmas tree. And rightfully so. Cramer’s main thrust was thrice: one, that Laxman chose not to forewarn shareholders at any point that business was flagging; two, that the coffee was too “darn” expensive; and three, that Laxman was doing a shit job. Instead of acknowledging the problems and admitting they needed to regroup, Laxman pretended they’d already been on the case. He pretended that more deals and discounts would do the trick. He referred vaguely to “action plans” to fix falling store traffic. He brought up “positives” like increased Starbucks Rewards membership, as if these would somehow magically and anachronistically offset the underperformance of the past quarter. While Rewards members have risen steadily, as seen below, revenue per customer can’t follow if they’re bribing people with discounts just to get them in the door.

Per the latest Q2 earnings call, Niccol’s diktat to end flagrant discounting is leading to the return of non-Rewards customers. Unlike Laxman, Niccol understands—and is willing to admit to himself—that Starbucks can’t return to growth without the casual customer.

The hiring of Brian Niccol breathes life into the java giant. And there’s reason behind the optimism. Niccol brings a pointed talent for turnarounds, specifically with regard to efficiencies, branding, and culture.

As mentioned above, the stock gapped down 16% after the earnings call. In the days following Laxman’s interview with Cramer it fell another 2.6%.

Sometime during that period I began buying shares. Laxman’s disastrous showing on CNBC was the most bullish thing for Starbucks since Schultz’s last return. Why? There was simply no way the board could justify his position any longer. He had failed in practically all respects as CEO, and his delusional reaction rid the board of the need to even appear supportive. Of course, I didn’t actually know that they would fire him. But the price, at $74 and change—down from an ATH of just about $126—was attractive enough that I was willing to, at the very least, collect a 3%+ dividend as I waited for the push notification from Wall Street Journal that he’d been axed.

Which they did just a few months later. A few weeks after that, they hired Niccol, and the stock rocketed 28%. Few CEOs garner such a reaction, but his was somewhat deserved. Niccol is a maestro, and it’s already showing.

The Bull Case

One of Starbucks’ best traits is its simplicity. Unlike my portfolio of tech stocks, in which my investment theses are built with mental models that depend on high-level understanding of often complex concepts and subject matter, the bull case for Starbucks rests on the fact that selling coffee is an extremely high-margin business, they have the best coffee brand in the world, and therefore they are more likely than not to grow their store count and increase same-store sales. If they can improve margins as well, even better. The simplicity allows one to spend more time on the subtle details that make the difference between a lumbering coffee giant and an energized juggernaut.

The problem with Laxman is that, like many bean-counters (pun intended), he tried to outrun the company’s problems with short-term solutions. Slowing growth? Raise prices! Declining same-store sales? Shuffle people out the door as fast as possible! Decreasing margins? Charge for alternative creamers!

Thinking of ways to separate customers’ cash from their wallets without providing any additional value has literally never succeeded over the long run. Yet somehow, Laxman thought he would be the first. To his credit, when he first stepped into the role he also did his employees’ shoes, taking the time to work at Starbucks stores to figure out how to best run them. At the end of the day he just didn’t have the ability to generate insights or the willingness to implement them.

Brand Equity: Back to Starbucks

There are four central elements to Niccol’s plan to point Starbucks back on the growth path. The first is restoring brand equity.

Brian Niccol has been so successful to this point in his career—and I think he will continue to be successful at Starbucks—because he does not care if financials decline in the short term. All he cares about is long-term shareholder value. This aligns with Howard Schultz’s view, which is aligned with the founder mentality. We see this in Schultz’s comments following Niccol’s first earnings call as CEO:

I listened to [the] Starbucks earnings call yesterday and was very impressed with Brian’s grasp and understanding of the many facets of Starbucks and the issues facing the company. He instinctively understands the equity of the Starbucks brand, the customer experience, and the unique role our green apron partners have. I’ve heard from many partners who are inspired by the “Back to Starbucks” call to action and strategy. I’m looking forward to following the journey.

Like Schultz, Niccol understands that, even though coffee can be differentiated to a certain extent, to the public writ large it’s a commodity. In fact, according to the Intercontinental Exchange (ICE) and modern financial and economic history, it quite literally is a commodity. While fancy new drinks can draw customers, the Starbucks brand of premium coffee is as much marketing as fact. Coffee lovers like me know this given that we can find a far more differentiated product at a boutique local shop that sources incredible flavors you will never find at a Starbucks. But what those locations don’t have is 38,000 other stores, each with a synonymous, lush atmosphere, and located near your home. They also don’t have the ability to market directly into your home and phone via TV and digital. Cultivation of that brand was lost under Laxman, who inundated customers with deals as if Starbucks were a dying discount brand like Bed Bath and Beyond. He cheapened the brand for a quick buck, and it failed miserably.

Furthermore, Niccol’s ability to recognize opportunities for optimization and invent ingenious methods to actualize them is nearly unparalleled. He sees the Matrix in a way that allows shareholders to defer to his judgment without worry. We can find evidence on every level, from his tinkering under the microscope of green apron partner benefits and scheduling flexibility to the global Back to Starbucks initiative under whose banner his turnaround charges forth.

Until shareholders see financial improvement, it can be argued that Back to Starbucks is just another corporate euphemism for turnaround attempt. But Niccol’s track record—not to mention his language on earnings calls—gives me confidence that there’s merit behind the slogans.

Back to Starbucks is a four-pronged affair aimed at:

1. Reintroducing Starbucks to the world

2. Delivering the customer experience to win the morning

3. Reestablishing Starbucks as the community coffeehouse

4. Ensuring Starbucks is the unrivaled best job in retail, recognizing our success starts and ends with our green apron partners

All four steps are progressing at pace, none of them mutually exclusive. Niccol has implemented sweeping changes to the way Starbucks engages with customers and the world at large. Green apron partners have been given a brand new playbook that includes specific instructions such as personalized messages written on each drink and, more generally, a cheerier, yet also more efficient disposition with customers. Put simply, he is encouraging them to work harder and smarter.

But perhaps the most exciting change is the new operational algorithm. Drawing from his experience with Chipotle, Niccol and his team are cooking up an algorithm that will organize and prioritize each customer purchase into the optimal order so that green apron partners deliver all drinks and foodstuffs within four minutes or less. On the Q1 call Niccol provided a detailed overview of the algorithm’s genesis, purpose, and implementation:

Yes. So what we've done so far is we definitely put the stores into kind of quartiles as it relates to how many transactions they're working through. And what we've -- through this work, what we've discovered is more of the challenge comes through, frankly, the mobile ordering system not having a sequencing system. And what happens is that counter area gets really crowded, congested. And what occurs for our partners is the work switches to the task of just trying to get drinks and food solved for the rush, as opposed to being able to consistently deliver the moment of connection while they still deliver the coffee drinks.

And so the good news is we have a high percentage of stores that are already comping positively because -- and when we look at those stores, we see that the connection and the craft is being executed, and we're not in as many of these bottleneck situations. And so that's what we're focused on is how do we eliminate these bottleneck situations where the mobile ordering really overwhelms kind of the production experience to the point where we can no longer provide a great service experience.

So we've seen the difference in performance. We've seen the difference in -- and that's from a comp and financial performance. And we've also seen the difference in partner satisfaction, customer satisfaction. So we're working through exactly how we measure these things because, unfortunately, currently, we don't have a great system in place to measure the time frame on these things, which we are putting into place. But as I mentioned earlier, the good news is I was in one of our stores this morning where we've already started to put this algorithm in that happens kind of behind the scenes. And it smooths out, I would say, those rushes of mobile orders such that our teams are able to provide great moments of connection for the in-cafe customer and the mobile order customer as well as our drive-through customers.

So -- and we're seeing -- now we're only 2 weeks in on this, by the way, and it's only in 3 stores, but we're seeing really good performance both in the financial performance, partner satisfaction and customer satisfaction.

And on the recent Q2 earnings call, Niccol provided some insight into the effects of the new algorithm:

In test locations, average cafe wait times dropped by an average of 2 minutes, bringing 75% of cafe order wait times under 4 minutes at peak. Building on feedback from partners and these learnings, we're investing strategically in labor to optimize our operations, bring back a premium experience and better support our partners throughout the peak and the balance of the day. Beginning in May, we'll scale a new Green Apron service model to more than 2,000 of our U.S. company-operated locations and to more than 1/3 of our U.S. coffee houses by the end of this fiscal year.

The new algorithm is subsumed by the Green Apron service model noted above—a framework through which Niccol will reintroduce Starbucks to the world. He goes on to say that “This new model combines and unifies new service standards and expectations, changes to partner plays and deployment, streamlined routines and our order sequencing algorithm.” While the Green Apron model is the cornerstone of Starbucks’ reintroduction to the world, it’s the algorithm that will drive the most tangible benefits—and it’s these simple, yet incredibly significant innovations that Laxman, for one reason or another, couldn’t visualize. Despite visiting stores across the world and working alongside his employees, Laxman still couldn’t put his finger on the problem. The difference between the greatest CEOs and all the others is this ability to see.

Another seemingly small adjustment that will have outsized impact is the menu’s ongoing liposuction procedure. The algorithm will benefit tremendously from Niccol’s efforts to cull all the unnecessary crap. My wife’s best friend visited from Kentucky recently. Though anecdotal, without prompting she mentioned how much better the Starbucks experience has become now that the menu isn’t a Dickens novel.

Next, Niccol is also directly overseeing a brand new store design that will apply to both future stores as well as a select group chosen for remodeling. On the call he said:

That's why we're evolving our coffee house design standards to provide customers a welcoming space to connect and build community. We'll begin to bring reworked coffee houses online soon, and we think they will truly deliver an exceptional experience. The uplifts feel premium but keep renovation costs down and minimize closure days.

Starbucks’ drive to reestablish itself as the neighborhood’s third home starts and ends with new designs. Under Laxman, Starbucks continued to push customers out the door as fast as humanly possible. Rather than fixing the root of the problem—i.e. the inefficient operational procedures—Laxman sought to speed up delivery by rushing his own customers out the door—while simultaneously attempting to maximize profits by limiting staff. On the other hand, Niccol is investing in more staff because he did his homework and found, from A/B testing, that staff capacity was a far better indicator of delivery speed and efficiency than equipment. So despite increasing investment in labor, Starbucks is cancelling large CapEx in unnecessary equipment.

To that end, Niccol updated Shift Marketplace, an app used by Starbucks and other companies to organize employee schedules. The update “lets partners pick up and trade shifts within their district. It's increased the pool of partners to fill last-minute shift changes by 10x and has resulted in record high shift completion with 0.5 million more shifts filled year-over-year.” Again, this apparently small adjustment is already paying huge dividends.

The new store design includes digital menu boards—another wildly simple idea that will drive significant efficiency. Digital boards allow Starbucks to adjust the menu to reflect the time of day. Further, they will use data in real time to serve customers what they want in accordance with their region or location. The new designs will also more generally allow green apron partners to work more efficiently and cooperatively, which in turn will lead to a much improved customer experience.

Starbucks needed a shot in the arm less than it needed a long-term-oriented manager. Niccol brings both, with an emphasis on the latter.

Perhaps most bullish of all, Niccol stated in the previous earnings call—and reiterated on the Q2 call—that he sees Starbucks doubling its U.S. store count. Unless the company plans on drowning in debt—which has increased 340% since 2017—to reach such lofty growth, Starbucks must be able to fund its own growth. A company funding its own growth doesn’t mean forsaking all forms of debt. But it does mean maintaining a reasonable debt load, avoiding dilution, and continuing to find high-return opportunities for reinvestment.

Niccol’s strategy has revealed countless examples of long-term orientation. The first is his total acceptance of declining earnings. Far from indifference, Niccol expressed his disappointment with the results on the Q2 call, saying, “Obviously, I'd be remiss if I don't first just mention the hard fact in front of us, which is our Q2 2025 financial results were disappointing.” Note, however, that this has not stopped him from increasing investment in staff, marketing, and redesigns, implementing a price freeze throughout 2025 (at least), and stating just a few seconds later on the call that “it's not just about building back the business, it's about building back a better business.”

Niccol understands what Laxman cannot: that a turnaround requires implementing the strategies and tactics to turn the business around regardless of whether they work within the next few weeks or the next five years. Shareholders agree given that the numbers are far worse under Niccol, yet the stock has held up just fine. (In fact, the stock may have been much higher had it not been for the trade war.) Niccol understands that time toward actually improving the business is far better spent than debating with Jim Cramer whether the business is being improved.

The price freeze communicates to customers that he understands Starbucks was beginning to edge into the territory of rent-seeking behavior. He might not say as much, but he knows Starbucks coffee isn’t worth a massive premium—especially not without the premium experience Howard Schultz created and that he’s now working so hard to reestablish. The same goes for jettisoning the charges for non-dairy creamers. These tactics were abusive and patronizing. Further, Niccol understands the long-term value in incremental improvements, saying on the Q1 call in January:

To improve value perception, we also removed the extra charge for nondairy milk customizations, an impact of 60 basis points on the segment's margin in the quarter. Following this announcement, we saw strong increases in customer interactions with our brand as Brian shared previously. Additionally, nondairy customizations grew mid-single digits year-over-year off a double-digit decline in the prior year. Collectively, these targeted investments are showing signs of early progress. While there is a near-term impact on margin, we expect that through our disciplined approach to test and learn, we will make the right investments to drive long-term growth.

Increasing wages and benefits communicates to his employees that they are in fact partners—that he’s not just paying lip service. As noted earlier, the Back to Starbucks plan includes an effort to ensure that Starbucks is the best job in retail. Happy green apron partners leads to better service and a happier customer. Once again, Niccol is focused on improving the value proposition across the board, both at the center and out on the margin.

The renewed marketing efforts bring the Back to Starbucks initiative and long-term orientation full-circle. The new commercial released a few months ago puts Niccol’s genius on full display. It’s fun and energizing, and reinvigorates the premium aesthetic that Schultz originally envisaged rolling out across the globe. Niccol’s willingness to ramp up the advertising budget is the most visible evidence of his willingness to invest further in Starbucks’ brand equity.

Prospecting for Niccol’s Chances

As Bezos has noted, “There are two kinds of companies—those that work to raise prices and those that work to lower them.” Amazon is firmly in the latter camp. They work every day to pass savings on to customers, in turn giving them scale, which in turn allows them to lower prices even further. Starbucks falls in the former camp—a camp that relies heavily on brand awareness, mindshare, and equity. Niccol understands that a premium cup of coffee is worth what people will pay for it, and he understands that building the business back to its peak requires investing in its perception.

It’s a tall order, one that’s somewhat different and, in my opinion, more difficult than his mission at Chipotle. There, he wielded the U.S.’s favorite Mexican fast-casual restaurant. While he was brought in to fight the wounds inflicted by a spate of customer illnesses brought on by Chipotle’s food, this was a perception that was always going to pass as long as the issue was rectified quickly. Far beyond this rectification, Niccol’s success lay in his ability to optimize, promote, and proliferate Chipotle restaurants across the nation. The food was good enough to warrant significant pricing power, his innovations expanded margins, and they were off to the races.

With Starbucks, Niccol needs to convince people to pay more for a cup of coffee that many argue isn’t much better than the next—with many still calling it “Charbucks.” In reality the coffee is solid—not as good as your local boutique shop-slash-roaster, but much better than what 90% of Americans are making at home with their industrial-size jugs of Folgers and ancient Mr. Coffee machines. They can charge premium prices because it’s a good cup at a convenient location, and they offer a variety of tasty alternatives with roughly twice as much caffeine as the standard drip most people have on tap at home. Add to that an improved design and experience, and you can easily see why people love their Starbucks.

But it’s not quite the value proposition of Chipotle. Its next best substitute is Qdoba, which can boast only 500 stores compared to the former’s 3,200. Or is it? Millions of airport travelers can be seen throwing a toddler-like tantrum when forced to settle for Pete’s. I’m almost one of them, though I’m able to keep my emotions to myself. And millions of Starbucks Rewards members can attest to this phenomenon.

In fact, Niccol has indicated on multiple occasions that Laxman’s most damaging policies included the tidal wave of deals and general discounting. The manic depressive strategy of raising prices and then discounting to bring in more Rewards customers not only lacked cohesion but, far worse, diluted the premium Starbucks brand. There’s something about Starbucks that transcends the coffee itself. No other coffee company spans the globe with more than $34 Billion in annual revenue. With Niccol’s leadership, I think they will see this revenue double within the next 5-10 years, with cash flow rising even faster due to operational leverage and the stock price to follow.

The chart above communicates the opportunity ahead for Starbucks. Like Costco, Starbucks is beloved throughout the world, yet they have only begun to expand internationally. Considering the success they’ve realized in China, the most hostile territory in the world, it stands to reason that Starbucks will succeed in capturing market share in countries around the world—especially those with lower coffee penetration. As Starbucks has proven in China, they’re brand is powerful enough to change the culture, evidenced to an even greater extent by the rise of Luckin.

Buy the best, and f*** all the rest.

Buying the highest quality brands works. It’s a theme that transcends industry and sector. Costco is the best bulk discount retailer and has delivered the best shareholder returns. Amazon is the top ecommerce retailer—best returns. Netflix, Google, you name it. The highest quality service and product nearly always wins in the stock market as well.

This mental model can be extrapolated to many areas of analysis. Take, for example, customer demographics. There’s a reason luxury businesses dominate in a seemingly effortless manner. Companies like Hermès, LVMH, and Ferrari are successful to the point where the latter actively constricts supply. The model even extends to discount retailing—see how Costco and Walmart are slowly cutting off the oxygen of businesses such as Dollar General, which relies on the lowest-income strata for their profits. This seemed to work as they were still expanding their store count, but eventually, demographics caught up with them.

Starbucks is on the right side of this trade. Their main competition—Dunkin’ and McDonald’s—caters to a lower-strata economic class. Relying on penny-pinchers can lead to a race to the bottom. While they’ve succeeded in putting pressure on Starbucks in recent years, I firmly believe this is due to Laxman trying to win at their game, losing all grip on the Starbucks brand and customer base. His rampant discounting and restriction of green apron capacity were the main culprits. These moves were an attempt to bring back market share in the form of customers that were never their target market.

This isn’t to say that Starbucks should shun lower-income customers. It’s a matter of reality. Hermès will never make its nut from the bored steelworker’s housewife who buys a $4,000 leather purse to punish her husband for sleeping around. They earn on the backs of rich power couples who want to brandish the H on their belt.

Year

Starbucks Market Share

Key Competitors & Notes

2015

~39%

Starbucks led the U.S. coffee shop market with approximately 39% share.

2016

~39%

Starbucks maintained its leading position with around 39% market share.

2017

~40%

Starbucks' market share increased to approximately 40%, solidifying its dominance.

2018

40.1%

Starbucks held a 40.1% share of the U.S. branded coffee shop market.

2019

40%

Starbucks maintained a 40% share, with Dunkin' and JAB Brands as primary competitors.

2020

~40%

Starbucks' market share remained steady at around 40%.

2021

~39%

Starbucks experienced a slight dip to approximately 39% market share.

2022

~37%

Starbucks' market share declined to around 37%, with increased competition from Dunkin' and emerging brands.

2023

~39%

Starbucks regained market share to approximately 39%, maintaining its leadership position.

2024

~40%

Starbucks' market share increased to around 40%, with Dunkin' at 26% and Dutch Bros at 3%.

The table above shows remarkably consistent market share among U.S. café competitors. Though it doesn’t include non-café players such a McDonald’s, it’s a stark representation of their dominance.

Most salient is the fact that, during Laxman’s tenure, share dropped off temporarily, only to return to normal levels. We can infer from the data—i.e. the discounting and stalled same-store sales growth—that Laxman achieved this rebound by backfilling customer churn with lower-quality customers.

Niccol’s turnaround has no such aim. We can recognize in his strategy of investment across all facets of the business, most notably the brand itself, that Starbucks will win by regaining market and mind-share among the middle- and upper-class customers whose wallets will gladly unfold for a premium experience. Thus far, he seems to be making all the right moves.

Just yesterday, Starbucks announced a possible sale or stake sale of the China business.

The China business is one of the biggest risks. One of the main reasons I’m driven by qualitative concepts and measures—notice we’ve gone this far without discussing same-store sales and revenue—but the numbers are often an indicator. The fact is, revenue and same-store sales are flat/down, margins are deleveraging, and China is not helping.

We can see from the numbers to the left that things have been heading downhill ever since Luckin became a force. Things are turning around. The Q2 2025 print boasted $739.7 million, a 5% increase compared to $705.8 million for the same period in 2024. But it’s not enough to convince me that it’s worth dealing with a communist dictatorship with overt hostilities toward American enterprise.

News dropped last night that Starbucks is exploring a sale or sale of stake of the China business. My gut tells me it’s a good move. I do not like buying China, and even when times are good I view Chinese commerce for American business as a risk. The relentless potential for one man to eliminate a company’s ability to compete or conduct business altogether simply isn’t tenable. In the meantime, it’s still good to see that things are turning around. I expect Niccol will continue to make the right calls in what has been a fluid situation for quite some time.

Overall, I can’t make a judgment call without conviction until I’m able to digest the news. I will do so in time for my first Starbucks update in the months to come.

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Thanks for reading! Next up is Western Union, in which I will be examining whether their 15-20% cash yield suffices for their current innovator’s dilemma.