What’s worth pointing out as well about Starbucks’ sudden comps run is how it’s mixing. Beverage contributed 5 points to the brand’s U.S. same-store sales growth, led by the strength of cold beverages, Johnson said. Starbucks completed the rollout of its Nitro Cold Brew across company units over the summer—a move that included new equipment. Starbucks supported it with national advertising for the first time in August. It was effective in drawing in non-core, “occasional” customers, and upping afternoon business.
CFO Pat Grismer added Starbucks’ cold platform grew across all dayparts, led by cold coffee, refreshment, and tea.
A LOOK BACK:
Q3: Starbucks' dramatic spike is the start of something big
Q2: A rise in cold drinks heats up the afternoon coffee wars
Q1: Starbucks' rewards empire keeps getting bigger
Overall, transactions lifted throughout for Starbucks for the second consecutive quarter and beverage led the comps growth for the fifth straight period (food contributed the remaining point in Q4).
Brewer said you can really break down the period’s success in two parts. Beverage innovation, anchored by heavy promotions—pumpkin in fall, flavored iced teas over the summer—and the aforementioned employee evolution that frees up workers to engage with customers.
“Additionally, our drive-thru business continues to grow well, and you'll see that continue through fiscal year 20,” Brewer said
Rewards grows, again
Starbucks’ U.S. Rewards base expanded to 17.6 million active members in Q4, up 15 percent versus the year-ago comp. Johnson said the multi-tier changes drove sign-ups. There are also 10 million active members in Starbucks’ China rewards pool, a dramatic 45 percent rise from 2018. The company introduced a spend-based program update last December.
In the U.S., Brewer said loyalty contributed nearly 2 points of comp and is making up about 42 percent of Starbucks’ tender.
She added customers embraced the choice provided by Starbucks’ new redemption tiers, with the 150-star level witnessing the majority of volume. “And we've also seen that our low frequency members that you've heard us refer to as our occasional customers, they are driving a more significant portion of the active members,” Brewer said.
“The other thing I'll mention is that we continue to grow at peak in our morning peak time frame and we're seeing actually growth across all dayparts,” she added. “That occasional customer that we're introducing to Starbucks Rewards is coming in in the afternoon, and that's how we are seeing the lift through all the dayparts. That is the work that's happening by adding the new multi-tiers to the program.”
Revamping its industry-leading rewards platform in April was met with some flak from loyal guests. The new, tiered structure encouraged sign-ups by offering rewards faster, but some people were dismayed by the shift in redemption structure. Instead of exchanging a flat 125 stars for a free food or drink item, for instance, Starbucks now apportioned free items at different levels of stars.
Once that initial curve was crossed, however, Starbucks enjoyed the benefits, Brewer said, which gear toward inspiring repeat visits and getting digitally registers customers to take the next step to loyalty. In the past, it required 30–40 trips to get stars. This “redemption for all” structure offers new members stars within two to three visits.
It addresses a big concern: Could Starbucks previously keep customers engaged long enough to pulse benefits and win them over for the long run? How many bailed after a few visits or weren’t encouraged enough to activate their rewards?
Before, members could only redeem once they hit 125 stars. Now, they’re able to cash in their stars across five tiers, ranging from 25 to 400 stars. And Starbucks added new items, including merchandise and at-home coffee, for customers to score. The last part is a no expiration feature for Starbucks credit card holders. Stars last indefinitely.
“… Right now, we're encouraged that we are moving these customers to the Starbucks Rewards level and we are pleased that we did add the other layers of redemption just so that we can expand the excitement of the Starbucks brand to a broader customer,” Brewer said.