Starbucks Corp. plans to expand in the Middle East, adding hundreds of new stores, as the global coffee chain seeks to bounce back in the region after facing challenging conditions and consumer boycotts last year.
The company plans to open about 500 new locations and add 5,000 jobs over the next five years in the region, Chief Executive Officer Brian Niccol said.
Starbucks currently has more than 1,300 stores in the region where it operates through a licensing agreement with Kuwaiti family conglomerate Alshaya Group.
The coffee chain faced backlash last year from customers accusing it of not doing enough to pressure Israel to end its offensive in Gaza. The boycotts had a significant impact on traffic and sales in the Middle East and also weighed on its US business, the company said. Alshaya last year cut around 2,000 jobs, citing “challenging trading conditions.”
The boycotts were “not based on anything that’s accurate or true. We’ve never supported any militaries,” Niccol said during his first visit to the Middle East since becoming CEO last year.
Niccol joined Starbucks in September to revive growth at the coffee chain. Sales have been eroded by a range of problems, from the boycotts to lengthy wait times and consumer pullback from higher prices.
Niccol initially focused on crafting a plan for the North America business, which accounts for about 75% of revenue. He has said he would restructure the corporate ranks to reduce complexity, eliminate layers of management and clarify who’s responsible for achieving goals. The changes will likely result in job cuts that will be announced by early March.
He’s now turning to international markets. Besides the Middle East, Niccol said Starbucks will add a few more thousand stores in China in the future despite struggling amid the country’s uneven economic recovery and increasing competition from lower-priced competitors. The company is reviewing options for the business that could include selling a stake. Niccol visited China in January for the first time since taking over.
The company’s shares have risen 24% this year through Wednesday’s close. The stock got a boost after the company said in late January that its sales slump had moderated, signaling that Niccol’s initiatives are starting to take hold.
