Would you like an NFT with your Starbucks latte? The coffee giant this week announced its plans to enter the Web3 space with the launch of its own NFT collection later this year where the individual digital collectibles also provide their owners with access to exclusive content experiences and other benefits, it said.
The company touted its plans to investors on its fiscal Q2 2022 earnings call by explaining how NFTs can help Starbucks extend its brand’s concept of the “third place” — meaning a place between home and work where people can feel a sense of belonging over coffee.
“Emerging technologies associated with Web3, and specifically NFTs, now enable this aspiration and allow us to extend who Starbucks has always been at our core,” Starbucks Chief Marketing Officer, Brady Brewer told investors on the call. “We are creating the digital third place. To achieve this, we will broaden our framework of what it means for people to be a member of the Starbucks community, adding new concepts such as ownership and community-based membership models that we see developing in the Web3 space,” he added.
The company noted it would build out its NFT community on an “environmentally sustainable” Web3 platform — a decision it said would be more in line with its existing sustainability commitments. The company didn’t indicate what sort of blockchain technology would be involved with its NFT collections, however, but said it was likely to be “multi-chain” or “chain agnostic.”
While Starbucks was light on the details as to what its debut set of NFTs would look like, who would design them, or what sort of membership features they’d provide, it did explain in a subsequent blog post it sees the potential to create an accretive business adjacent to its stores where digital collectibles aren’t just bought and sold in a speculative way, but actually double as an access pass providing customers with special experiences and perks.
“We plan to start with our first NFT collection, membership, and community later this year, based on coffee art and storytelling. It will come with a host of unique experiences and benefits, worthy of a genesis NFT collection from Starbucks,” the post read. This collection would then serve as the backbone to build out future collections and collaborations in the Web3 community, the company said.
While some businesses launch into NFTs without much thought as to how the technology fits into their larger business plans, Starbucks appears to be attempting a different approach. It’s brought in Adam Brotman, the architect of its Mobile Order & Pay system and the Starbucks app, to help serve as a special advisor on the project.
Notably, the company said it’s also looking for a new CEO who understands the potential of these new technologies, according to current interim CEO Howard Schultz. The longtime exec had returned to head the coffee chain — now undergoing a unionization push — following the departure of Kevin Johnson, who had served as CEO since 2017.
In addition to having a solid understanding of the Starbucks brand and global experience, he said the new CEO should have an understanding of Web3 technologies, as they could help Starbucks better connect with younger people. The NFTs could also provide a way to create incremental traffic and revenue, not only in terms of retail, but also incremental revenue as a result of its own business, the exec added.
“I think the next CEO is going to be a creative person who’s going to understand that the equity of the Starbucks brand has real legitimacy and relevance outside of our stores. And the world we’re living in today, our customer base is getting younger, they’re digital natives, and they expect Starbucks to be as relevant outside of our stores as we are inside,” Schultz explained. “….the new CEO, obviously, needs to have an understanding and a grasp and a conviction on the fact that we can play in multiple theaters that could be accretive on their own merit and complementary to our retail business,” he said.
Investors didn’t ask many questions related to Starbucks’ new NFT venture, instead focusing on learning more about higher-level business impacts like the unionization efforts, the suspension of share buybacks, and the situation in China, among other things.
It’s not surprising that Starbucks would be willing to experiment in the NFT space, though, given the company has made a name for itself as being ahead of the curve when it comes to the embrace new technologies. Its mobile payments system, for example, helped pioneer the idea of using a phone to pay for orders well before Apple Pay and other NFC-based tap-to-pay checkout experiences were broadly available. Today, Mobile Order & Pay is an over $4 billion business, Starbucks said, up 400% in five years and up 20% over last year. Starbucks said it’s now working to roll out enhanced digital tipping so customers could tip even when they weren’t paying with their Starbucks card.
The coffee giant topped its Q2 revenue expectations, with $7.64 billion vs. $7.6 billion expected and earnings per share of 59 cents adjusted, in line with expectations — despite losses in China due to new Covid lockdowns. Q2 net income came in at $674.5 million, or 58 cents per share, up from $659.4 million, or 56 cents per share, in the year-ago quarter.
The company didn’t offer a forecast for the quarters ahead, citing several factors including China, inflation, and investments in stores and employees.