Exclusive-Starbucks scraps AI inventory tool across North America

By Waylon Cunningham

NEW YORK, May 21 – Starbucks terminated an AI program workers used for automating certain inventory counts this week, nine months after deploying it across its North American stores, according to an internal newsletter reviewed by Reuters and two people with direct knowledge of the situation.

The tool was part of CEO Brian Niccol’s efforts to fix the coffee chain’s persistent product shortages that he has blamed for hurting sales. The app – designed to improve Starbucks’ visibility into shortages at stores – frequently miscounted and mislabeled items, such as confusing similar milk types or missing them altogether, Reuters reported in February.

“Starting today, Automated Counting will be retired,” read an internal company newsletter dated Monday that Reuters reviewed and verified with two employees. “Beverage components and milk will now be counted the same way you count other inventory categories in your coffeehouse.”

In February, Starbucks told Reuters that adoption of the tool had improved product availability in stores – one of Niccol’s primary store-level measures of progress in his corporate turnaround campaign.

In a statement to Reuters on Thursday, Starbucks said the termination of the program – which covered milk and other beverage products – came from a decision to “standardize how inventory is counted across coffeehouses as we continue to focus on consistency and execution at scale.” The coffee chain also said it is working towards more frequent, daily replenishments to stores and continued supply chain improvements.

“Our goal is simple – if it’s on the menu, customers should be able to order it,” the company said.

The company shared screenshots it said showed employees sharing internal feedback praising the change. “Thanks for discontinuing Automatic Counting! The thought behind it was great, but the execution was proving difficult,” read one.

RAPID ROLLOUT IN SEPTEMBER

Starbucks rapidly rolled the tool out to North American stores in September, the company announced at the time. The AI-powered app aimed to replace hand counts of some products with automated ones that were expected to be faster and more accurate. Cafe workers hold a computer tablet up to shelves for syrups, milks and other beverage products, which the app scanned with LIDAR and camera data.

That announcement, since deleted from the company website, said the technology would set the stage for “smarter supply chain optimization.”

A video uploaded by Starbucks at that time showed the tool failing to recognize a peppermint syrup bottle on the shelf as it counted adjacent bottles.

Niccol, who took over in late 2024, has also hired logistics executives as he works to repair a supply chain that current and former employees have described to Reuters as fragmented and hampered by outdated systems. 

Analysts at Morningstar wrote last month that they believed restaurant-level margins would improve in the long-term based “on technology initiatives aimed at saving labor hours and waste, such as AI inventory tracking, and operating leverage.”

AI PROGRAM WAS IN TESTING FOR YEARS

Niccol has leaned on technology in his operations-focused turnaround called “Back to Starbucks,” including new AI-driven tools to sequence orders and assist baristas.

The CEO, known for pushing through turnarounds at Chipotle and Taco Bell, is under pressure from investors to sustain recent sales growth and improve profits that have sagged under his hefty investments in additional staffing. 

Shares struggled early in his tenure, but the stock is up 24% so far in 2026.

Starbucks posted its strongest quarterly sales growth in 2-1/2 years last month, but operating margins in its core North American market have fallen to 9.9% from 18% two years earlier, before Niccol took the helm. 

The automated counting program had been in testing in the years before Niccol inherited it and deployed it nationwide.

The app’s provider, NomadGo, said in a statement to Reuters on Thursday that it is “continuously learning from customer and user feedback” to improve its products.

(Reporting by Waylon Cunningham, Edited by Lisa Jucca and David Gaffen)