Far away from Staten Island, a union battle is heating up in a different part of New York State at the hands of another titan of American industry. Employees of several Starbucks (NASDAQ:SBUX) locations throughout the Buffalo, New York, area are filing for union election. When the organizational campaign was first mounted in August 2o21, Starbucks attempted to sort out operational disputes by sending personnel to each location. Nearly three months later, three more Buffalo area locations have filed the same petitions requesting elections on this coming Tuesday. SBUX stock hasn’t faired well today as reports come in regarding the unionization developments.
What’s Happening With SBUX Stock
As the fight escalates, Starbucks CEO Howard Schultz has flown into Buffalo today to address the workers and help resolve the growing disputes between management and labor. This hasn’t helped SBUX stock, which is down more than 2% for the day as of this writing. The past week hasn’t been much better, with shares falling by almost the same amount. The stock fell in the final days of October. Despite a 10% surge in the week that followed, it is currently down 0.15% for the month.
Meanwhile, one of Starbucks’ new competitors is picking up steam. Dutch Bros Coffee (NYSE:BROS) has been trading well since its early fall IPO (initial public offering). Despite a rough start to the day, it’s currently up more than 4% amid reports of expansion plans. Shares fell over the past week, but BROS is still up more than 32% for the month.
Why It Matters
Unionization isn’t typically regarded as being a good thing for stock prices. This notion, however, isn’t always true. Last month when Staten Island Amazon (NASDAQ:AMZN) workers moved to unionize, I found considerable evidence that suggested that the forming of a union doesn’t have to send share prices down, depending on how the company handles it. While the Amazon union dispute still has yet to be resolved, nothing has indicated that the company is going to handle it well.
Starbucks still has the opportunity to do a better job. The question is whether it will. The Wall Street Journal reports that pro-Union workers claim support for the company’s Starbucks Workers United group is increasing. It also reports, though, that Starbucks has been trying to stop the vote since the campaign’s earlier days when it only included three stores. The personal involvement of the CEO sends a clear message that the company is serious about settling matters soon and that they likely aren’t going to bend to the demands of the workers.
These workers might have sufficient leverage, though. The labor market is tightening, and companies like Starbucks are losing workers already. For a customer-facing business like Starbucks, lack of labor can lead to management ruling in favor of workers to avoid further shortages down the road.
What It Means
So far, Schultz hasn’t done a great job of handling the unrest within his company. While addressing employees, he made an analogy to the Holocaust in an attempt to highlight Starbucks’ emphasis on sharing and doing right by its workers. As can be expected, this gesture has not been well received, with Twitter (NYSE:TWTR) users reacting expressing their offense at Shultz’s insensitivity.
Starbucks antiunion propaganda instrumentalizes the Holocaust?! It’s so awful. So so awful. 😭 https://t.co/hyzI2TPDfO
— Veena Dubal (@veenadubal) November 10, 2021
It’s easy to see why this type of behavior wouldn’t reassure anyone that the company is going to adapt a compassionate approach in responding to the unionization efforts. The unionizing at Amazon didn’t pose too negative an effect on share prices, though, so its quite possible that SBUX stock will bounce back quickly. The recent declines may have more to do with low revenue reporting than with employee union campaigns.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.