Starbucks Plans Barista Raises, Says Unionized Cafes Will Need to Bargain

Starbucks Plans Barista Raises, Says Unionized Cafes Will Need to Bargain

Starbucks Corp.

SBUX -1.38%

Chief Executive

Howard Schultz

outlined expanded wages and benefits the coffee giant aims to extend to baristas, but he said the chain’s growing number of unionized cafes would need to negotiate their own deals.

The Seattle-based coffee giant said Tuesday that it would invest roughly $200 million in stores and employees, including higher hourly pay, fixing cafe equipment, increased training, perks for highly skilled baristas and an app for better workplace communication.

Starbucks is expanding pay and benefits as a battle between the company and newly unionized employees escalates. The Starbucks Workers United union, formed in late 2021 following votes in Buffalo, N.Y., cafes, has been pushing for better benefits, more training and a bigger voice in company affairs.

Mr. Schultz, Starbucks’s longtime leader who returned in April for a third stint as CEO, has ratcheted up the company’s efforts to persuade baristas that Starbucks, not a labor union, can best look out for employees’ interests.

A “union contract will not come even close to what Starbucks offers,” Mr. Schultz said Tuesday during an investor call.

Starbucks Workers United said that its campaign pressured Mr. Schultz and the company to improve pay and benefits for employees, steps that the union said it has proposed in bargaining sessions for union-represented cafe workers.

Starbucks on Tuesday reported higher quarterly sales and profits in its first financial results since Mr. Schultz resumed the helm. Last month Starbucks halted a previous plan to buy back billions of dollars’ worth of shares, a move Mr. Schultz said would help the company invest more in workers and operations that he said needed to change.

He said those investments would help Starbucks handle increased demand at stores and boost profitability, while improving customers’ experience and reducing strain on baristas. For example, customers are ordering more customized, cold drinks, challenging employees to keep up, Mr. Schultz said.

Such frustrations have played into Starbucks employees’ push to organize over the past year. Around 240 of Starbucks’s 9,000 U.S. corporate stores have petitioned to unionize. As of Tuesday, Starbucks Workers United had won 46 elections, lost five and had undetermined results in three others, the National Labor Relations Board said. The federal agency had scheduled another 118 elections in coming weeks.

The additional spending Mr. Schultz outlined Tuesday includes Aug. 1 pay increases of at least 5% for baristas who have worked at Starbucks for two years or more, the company said. Baristas newer to the company will get pay bumps of least 3%, it said. Starbucks will also give one-time bonuses in August for store managers and other leaders.

Starbucks is working on allowing customers to directly tip employees when they pay by credit cards, one of the top requests from workers, Mr. Schultz said.

The company said the new spending outlined Tuesday on wages, benefits and store improvements would occur in all U.S. company stores where it can make changes unilaterally, a group that excludes those that have unionized. Under federal law, new wages, benefits and working conditions for unionized workers must be agreed upon through collective bargaining, the company said. Starbucks and the union have both said they have held bargaining meetings.

Workers United, the union supporting organizing Starbucks workers, said in a letter to the NLRB last week that the company’s stance on new benefits violated the National Labor Relations Act. Union lawyers asked the agency to intervene, writing that Mr. Schultz’s statements threatened to chill labor-organizing activities.

An NLRB spokeswoman said Tuesday that the agency received the union’s letter. CNBC earlier reported on the union’s written allegations.

A Starbucks spokesman said that Mr. Schultz’s statements were backed up by law pertaining to collective bargaining and that the CEO was focused on building the company’s future.

Mr. Schultz said Tuesday that Starbucks is navigating rising costs and other challenges, including new Covid-19 lockdowns affecting its China cafes in the company’s most recent quarter.

Starbucks’s global same-store sales for the three months that ended April 3 were up 7% from the same period last year. Quarterly earnings outpaced expectations of analysts surveyed by FactSet, with net income of $674.5 million 2.3% higher than the previous year’s period.

Inflation and spending on employee wages, training and new hiring depressed cafe profit margins in North America, Starbucks said, though increased orders and higher prices provided some boost to store-level profit.

Starbucks suspended guidance for the remainder of its current fiscal year, as Mr. Schultz said the need to invest more in stores and employees, growing inflation and uncertainty around its China market made it too difficult to predict earnings. He said that the returns on buybacks didn’t justify them at a time when that money could be used to help boost employee retention.

Starbucks shares rose 5.1% to $78.10 in aftermarket trading.

Mr. Schultz has been broadly assessing Starbucks’s operations since returning, and he said Tuesday that new stores need to be redesigned to focus on to-go sales, including through more productive drive-through locations.

“We’ve been unable to meet the relentless demand we’re seeing in our U.S. stores as seamlessly as our customers and partners expect,” Mr. Schultz said, using the company’s term for baristas.

Mr. Schultz is also playing a lead role in selecting his successor. He said that the company expects to find a new permanent CEO by the fall and that he would remain at the company until sometime in 2023 to help train the new leader. He said he intends to remain on the company’s board.

Mr. Schultz said he and the board are being careful in the search and have been pleased with the candidates they have met with so far.

“There is no shortage of people who would like this job,” Mr. Schultz said.

Howard Schultz Returns as Starbucks CEO

Write to Heather Haddon at [email protected]

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Rachel Meadows

Rachel Meadows

Trending topics news writer who enjoys cooking, walking her dog and travel.

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