Starbucks COO Roz Brewer on how the company has adjusted business due to COVID-19

Roz Brewer, Starbucks COO and Group President, joined Yahoo Finance's Julia La Roche for an exclusive interview to discuss how COVID-19 has impacted the company, the company's plans for expansion in the U.S., and the popularity of its mobile order offering.

Video Transcript

ADAM SHAPIRO: Shares of Starbucks up about 3/4 of a percent. Who can blame us? It's that time of year when some of us succumb to Starbucks' Christmas Blend. But something else, Starbucks plans to grow the number of company-owned stores in the US by 800 new stores each year with plans to reach 16,000 locations by 2023. So joining us in an exclusive interview to discuss how technology and evolving consumer habits will fuel that growth is Starbucks COO and Group President Roz Brewer along with Yahoo Finance's Julia La Roche. Julia?

JULIA LA ROCHE: Thanks so much, Adam. And Roz Brewer, it's always a pleasure to have you on. So thank you again for that. And let's talk about the transformation that's taking place at Starbucks. I think the last time we spoke about two years you outlined some of the transformation. Of course, COVID-19 has accelerated some of those consumer trends. Would like to hear from you, what are the trends that you think will persist beyond this pandemic, and how is Starbucks adapting?

ROZ BREWER: So first of all, Julia, thanks for having me. And I think, you know, this pandemic has taught us many things. First and foremost is always be an innovator. And thank goodness that Starbucks had quite, you know, a pathway in front of us in terms of the innovation that we had in our pipeline. And we've been accelerating since the COVID outbreak in pulling forward all of our latest and greatest technology. And it was all positioned towards the need state of convenience.

We knew that even before COVID hit, one in four of our transactions in our stores were made through our Mobile Order & Pay, and 80% of our orders were to-go orders. So in a position where there's a pandemic and people aren't comfortable and we're social distancing, we feel like we were prepared, but we did have to accelerate things around our store development strategy and our cleanliness practices in our stores and the way we kept our partners safe.

JULIA LA ROCHE: Well, Roz, there are a lot of things in there that I'll want to unpack with you. Let's talk about store growth. As Adam was mentioning, the plan's to grow 800 new stores in the US each year until you hit 16,000. Of course, I'm a native New Yorker. That's where I live now. And I'm used to seeing a lot of Starbucks stores. Where can we expect to see the store growth, and what will those stores look like?

ROZ BREWER: Sure, so first of all, it's important to know that we're going to be repositioning our footprint across North America. Primarily, you have heard us talk about some of the store closures we're doing, but we're doing that in order to meet the customer where they want to access coffee.

So bringing on new formats in places like urban districts, metro districts where there's probably dense high-rise office buildings where now people will be working from home. A certain percentage will stay at home. There's estimations out there, Julia, that there's probably 25% to 30% that won't return to a traditional workplace.

So we are accommodating that. So our growth will come in metro suburban areas and in those cities and states where you see maybe through the center of the United States and across the bottom, and that's a growing area for us. And we're able to bring in new formats and really look at our drive-thru format, which is really a high productive model for us, and the way that our customers enjoy accessing coffee even during the time the cafes are open or during this time where we're social distancing.

JULIA LA ROCHE: I want to talk about the drive-thru. You were demonstrating some really cool artificial intelligence technology. What can customers expect in the future from the drive-thru as it relates to technology? And what do you think is the bigger unlock there for Starbucks?

ROZ BREWER: Sure. So yes, we're using a lot of the business intelligence we're gaining from AI not only to accommodate directly the customer experience, but even the partners' experience. So a lot of our new equipment, our espresso machines are now aligned with AI so that we can do really great preventive maintenance.

But in the drive-thru in particularly, you will see handheld POS, Point of Sales, handheld instruments that our baristas can use in order to speed up the drive-thru line. That will be one point of improvement. The second is that you'll see us create a new format that will have a double line, a side by side drive-thru line, which actually adds speed to the out of the window times, what we call OTW.

And then also, too, you will see us do things with the menu board. And that menu board is really customizing, Julia, so that when you come through the drive-thru line, eventually we'll know that it's you. That barista, first of all, we'll see your face. You'll see their face. And then, we will also let you know what we're learning.

And so during a particular time of day when we know a popular drink is selling in that area, we can suggest that to you. So suggest either based on your history of purchase or time of day or that particular location, if it's cold or if it's raining. And so it's helping us actually, you know, really speak to the customer and help them decide, but also, too, it's improving what we could see in terms of expanding ticket and being suggestive about what a customer might be interested in.

JULIA LA ROCHE: You know, probably a key driver of that, Roz, is the digital ecosystem you all have built. Of course, the app, I think the latest was 19.3 million users, and some of the data you shared, one in every four transactions-- you said this earlier-- comes from Mobile Order & Pay, and nearly 50% of the revenue, yet you will have tens of millions of customers in the US who might not be in that digital ecosystem. What is the big challenge you have to overcome to bring more into that? And what do you think could happen? What is the growth story when you do successfully bring more members into your digital app?

ROZ BREWER: Right. So you're right around-- you're correct. That number of 19.3 million, 90-day active members currently, and we think the addressable market is more like 75 million. One of the biggest opportunities for us is what we introduced last September, our Stars for Everyone so that people can decide if they want to apply a payment or not online and have a stored value card. And so it's giving people flexibility in terms of how they want to transact with us.

And then, it gives us the opportunity to grow that occasional member to a Starbucks rewards member, which is our highest-performing, most routinized customer that we have. And so really giving that flexibility, Julia, is our next step in closing that gap in addition to the work that we're doing with AI so that our customers know that we know them better and that we want to create a relationship with them.

And it also allows our baristas to really interact with who's coming through the drive-thru or who's stepping into the store, and it's nothing like, especially in a time like this, for someone to address you by name and make you feel at home in a warm and welcoming environment. And so we're working to make that happen on behalf of the customer.

JULIA LA ROCHE: Starbucks COO Roz Brewer, I thank you so much for joining us on Yahoo Finance Live. Adam, back to you.