• Starbucks launched its new three-tier loyalty program on March 10^th as a way to refine it to meet distinct consumer needs. Should it be successful, it is expected to increase loyalty engagement and average unit (location) volumes. Several LTOs / special beverages were also introduced to align with the launch.
• Two weeks post launch, Advan observes* an improvement in store traffic and the average check $-size, with traffic improving by over +50bps and check, over +100bps.

Starbucks loyalty program in the US is very large at nearly 60% of U.S. company-operated revenue, or more than $13 billion in consumer spend. As such, making changes to the program entails both rewards and risks. On March 10^th the new program launched, which evolved into a three-tier program (Green, Gold, and Premium) as described in the three graphics below (borrowed from Starbucks’ recent investor day in January).

‍

During the January investor day, Starbucks’ Global Chief Brand Officer Tressie Lieberman said:

• Our current program has a one-size fit some approach regardless of whether you transact once a year or once a day. By listening to the member feedback, we saw a huge opportunity to make the experience more personal and more engaging. We also saw the opportunity to drive spend and frequency through tailored benefits and focus discount dollars on what our members value most.
• We're introducing three membership levels designed to make every member feel valued and rewarded. Green is our first tier, and it will be our largest. In addition to favorites like the birthday reward and personalized offers, we're adding a new benefit that gives members a free beverage modification monthly. Members at this level can also keep stars from expiring with monthly activity…
• Gold members enjoy all green benefits and their stars never expire, something unmatched by our competitors. Unlocking Gold also means members earn stars 20% faster than Green.
• Our most loyal members at the Reserve level will get everything from Green and Gold plus access to exclusive merchandise and experiences, and they will earn stars 50% faster than Gold.
• Our new program motivates members to reach higher tiers. This creates powerful incentives to drive frequency and fuel growth. And with the scale of the program, small changes in behavior can compound quickly. For example, if half our active rewards members transact just one additional time each year, we will deliver an additional $150 million in revenue.
• We've enhanced Discovery in the app with a trending beverage category and the secret menu, harnessing the power of customization that occurs every day in social media and with our baristas...
• We believe it has the power to deliver up to a point of comp contribution for the U.S. company-operated business. Results will grow with adoption, and we're confident this design sets us up for success.

The chart below shows observed* visits / spend going into March 10^th, and the two weeks thereafter. (We’ve included California traffic to help isolate the signal from this year’s wacky weather.) Clearly shown, traffic / spend have firmed up since the 10^th, especially spend. On a rolling-7-day basis, the average ticket has increased +2.2% (or +$0.33), which is quite material (seasonality may also be at play, and so, isolating for that reduces the increase to +1.3%). Assuming no underlying price increases and that the non-loyalty portion of the business (40%) remained unchanged, then the +1.3% increase in the average ticket for loyalty member transactions would be +2.2%, the result of more items per check and more richly priced items.

‘* Importantly, Advan does not observe locations at channel partners (airports, hotels, etc.), inside malls, and at the ground level of “urban canyons.” As such, we only see 8.0K locations vs 16.9K company-operated stores.