JJ Kinahan, CEO of IG North America, discussed the challenges facing Starbucks, emphasizing the need for the company to restore its community-focused customer experience as it has become more transactional. He also noted a shift in investor behavior, with retail traders buying individual stocks instead of fleeing to ETFs during market volatility, indicating a growing awareness of market risks and a departure from previous trends of continuous upward movement.
In a recent discussion, JJ Kinahan, CEO of IG North America, shared insights on the current state of the market and the challenges facing Starbucks. He emphasized that the “free pass” for many AI stocks is no longer applicable, indicating a shift in investor sentiment and market dynamics. Kinahan highlighted the importance of community in businesses like Starbucks, referencing Howard Schultz’s comments about the brand’s decline in creating a welcoming experience for customers. He noted that Starbucks has become more transactional, losing the sense of community that once defined its success.
Kinahan suggested that Starbucks needs to focus on restoring the customer experience that made it great. He pointed out that the company has expressed concerns about consumer sentiment, which could lead to tougher times ahead. He humorously mentioned the idea of becoming a greeter at Starbucks, reflecting on the brand’s need to reconnect with its customer base. The conversation also touched on the pricing strategies of Starbucks, with Kinahan proposing that offering lower-priced items, like drip coffee, could attract more customers without devaluing the brand.
The discussion shifted to the broader market context, where Kinahan noted an unusual behavior among retail traders. Instead of fleeing to index-related ETFs during market volatility, many were buying individual stocks, indicating a “buy the dip” mentality. This behavior was seen as a departure from the typical panic response during market downturns. Kinahan observed that retail investors were targeting well-established companies like Apple, Microsoft, Goldman Sachs, and Coca-Cola, which have strong cash flows.
Kinahan also commented on the volatility index (VIX), which had seen a significant increase, suggesting that investors are now more aware of potential market downturns. He predicted that the VIX would remain elevated for the rest of the year as investors reassess their portfolios and consider the risks associated with their investments. This shift in mindset reflects a growing recognition that the market can experience declines, contrasting with the previous trend of continuous upward movement.
Overall, the conversation highlighted the challenges facing Starbucks in maintaining its brand identity and community connection, while also addressing the changing behaviors of investors in a volatile market. Kinahan’s insights suggest that both companies and investors need to adapt to the evolving landscape, focusing on value and community engagement to navigate future uncertainties. JJ Kinahan, IG North America CEO, joins ‘Squawk Box’ to discuss the latest market trends, how Starbucks and reinvent itself, what to make of the recent market volatility, and more.