Starbucks CEO: Millennials driving changes to tech, coffee menu

Julia La Roche

Millennials love their coffee—and their technology.

And for both reasons, the hotly-coveted demographic is driving Starbucks (SBUX) in a significant way, according to CEO Kevin Johnson.

"We're in the business of connecting with customers and creating a warm, welcoming environment in our stores over coffee and tea. that's the business we're in," Johnson told Yahoo Finance at the Starbucks Leadership Experience in Chicago.

He was asked if the company has become a "tech company" — and in a way it has.

Johnson explained that “the realization that two transformative elements of modern retail are creating an experience, a customer experience, in your store so that that becomes a destination.”

For those reasons, Starbucks has extended it to “a digital customer relationship. And if you fail to do either one of those you will struggle as a retailer,” he added.

NEW YORK, NEW YORK - DECEMBER 14: People gather at a newly opened Starbucks' Reserve Roasteries in the Meatpacking District on on December 14, 2018 in New York City. The 20,000 square feet coffee store features three floors of coffee and cocktail bars, gourmet food, coffee beans and coffee brewing accessories. This is Starbuck’s second Reserve Roasteries in the United States after a Seattle location. (Photo by Spencer Platt/Getty Images)

With nearly 31,000 stores worldwide, Starbucks has always established itself as a destination — or a “third place” between work and home, as the company likes to call it.

As technology transforms the retail landscape, and lets remote workers stay home if they choose, luring customers into physical locations has become more critical than ever.

Starbucks has “had to accelerate the pace of innovation. We've transformed the focus on beverages away from these limited-time offerings to more of our core beverages. We've reimagined happy hours in our stores," Johnson told Yahoo Finance.

“That has amplified Starbucks as a destination in many ways for millennials,” he added. “Look at the fact that over 50 percent of our beverages are now cold beverages,” citing key offerings like cold brew and Nitro.

And while these young consumers are coming to the stores, the digital is just as important, he explained. Specifically, the increase in mobile app users has been a driver of growth for Starbucks.

During the last quarter, Johnson noted that the Starbucks Rewards daily active members reached 17.2 million in the U.S., a 14% jump from a year ago. The program has been a critical driver for the coffee company's closely-watched comparable store sales growth, accounting for 42% of tender in U.S. stores.

In fact, the company's digitally-savvy customers visit the stores more often and spend more.

"That's allowing us to personalize their experience, personalized the recommendations we give to them and it's that combination of the experience in the store and that digital relationship that is driving our business," Johnson said.

Since Johnson took over in April 2017, shares of Starbucks have gained nearly 64%. The stock is up more than 50% since the beginning of this year.

Mark your calendar.

Julia La Roche is a finance reporter at Yahoo
Finance. Follow her on Twitter.