(Reuters Breakingviews) - Starbucks (SBUX.O) will have a workforce that will grow increasingly restless in 2023. But that might only play to its plans for an employee-lighter future. The $120 billion latte maker is looking to automation for its growth. By pointing fingers at unions, the company can take control out of their employees’ grip.
The company faced growing pressure from its workforce, which put founder and interim Chief Executive Howard Schultz, who came back for a third time in 2022, in a tough spot. Starbucks’ employees started organizing in 2021 in Buffalo, New York, and by late 2022, workers at more than 250 stores, or 2% of U.S. locations, had voted to join a union.
Schultz has said there is no need for unions, and he tried to make this clear through his use of cash. In 2022, he paused stock buybacks in order to pay higher wages. But unionized workers didn’t get those benefits. Instead, they, like others who are members of collective bargaining organizations, are required to negotiate through their union officials.
At the same time, Starbucks is moving quickly to automate, which will continue into 2023 under incoming CEO Laxman Narasimhan. In September, it laid out a reinvention plan that includes robotizing more in-store tasks. An investor presentation recently outlined plans to “simplify operations” and “leverage automation.”
Many companies like McDonald’s (MCD.N) and Target (TGT.N) have had to find technological solutions just as workers seek higher wages. Over 12 months through November, hourly wages for private, nonfarm workers have increased more than 5% to $32.82, according to data from the Bureau of Labor Statistics. Labor costs are eating into margins that are also being squeezed by rising prices for materials and transportation. If an ornery workforce can be replaced by a robotic one, there’s no better time than the present.
Other retailers could copy Starbucks. Cannabis stores like Green Thumb Industries’ (GTII.CD) Rise or pharmacy chains like CVS Health (CVS.N) could add automation for order pickup and quick purchases. Workers will also quickly lose their power if mechanization leaves similarly-skilled employees without a job. Even some Starbucks unions might not survive as the company closes stores and drags out negotiations. The coffee company may be getting the heat, but it will only motivate it to go grande on an employee-light future.
