Starbucks' CEO Says the Food "Could Use More Work"

Laxman Narasimhan hasn't been serving as Starbucks' CEO for very long, but he certainly dove headfirst into the role after former CEO Howard Schultz stepped down in March. Narasimhan has been getting a surprisingly intimate look at day-to-day Starbucks operations by working monthly shifts slinging coffee in order to stay closer to the company's culture and customers.

These experiences and transition into the chief executive role have helped him start to pinpoint what the beloved coffee chain does well and areas in which it can improve. According to Narasimhan, one of these potential areas for improvement is the food.

"Our stores need to better reflect what is needed to meet the evolved demand from where they were initially designed. Our beverage innovation is strong, food could use more work. And our innovation could be more purposeful and targeted," he said during an earnings call this week.

Narasimhan did not elaborate on what he thinks can be improved with the food. However, his dissatisfaction raises questions on whether he may push for menu changes in the future. Starbucks currently offers a range of hot breakfast sandwiches, wraps, lunch sandwiches, pastries, snacks, and desserts.

Narasimhan's overriding takeaway from the latest quarter and his first few weeks as the chief executive was that Starbucks' "performance is strong, but our health could be stronger." The company beat analyst expectations on earnings and revenue, with a 12% increase in same-store sales in North America.

Moving forward, Narasimhan wants to see Starbucks stores tailored to better meet customer demands, advance technology, and focus on fundamental operations. He specifically noted that the chain is "out of stock in more items than we would like" and currently offers more than 1,500 cup-and-lid combinations. Narasimhan wants to simplify operations in stores and sees an opportunity to streamline one aspect of the company's business by offering fewer, more sustainable, and cheaper cups.

"All of these opportunities will deliver top-line growth and margin expansion and create long-term value," he said.

While it remains unclear if the Starbucks executive will revamp the food menu, the company has been working on expanding its drink lineup. Starbucks started rolling out a divisive line of olive oil-infused coffee drinks in the United States in March and just launched several ready-to-drink beverages, including the Pink Drink, in grocery stores.