Starbucks’ cup will runneth over
NEW YORK — If you thought Starbucks was everywhere already, wait a few years, as the company has announced plans to open 3,000 more stores in the Americas alone in the next five years.
Senior executives at the company outlined details of its growth agenda across its global retail, emerging brands and CPG channels at its biennial investor conference this week.
“I am personally committed to seeing Starbucks deliver the innovation, execution and elevated customer experience necessary to achieve both these goals and remain one of the world’s most trusted and admired consumer brands,” said Starbucks chairman, president and chief executive officer Howard Schultz, who returned to helm the company in 2008 following an eight-year hiatus.
In addition to the more than 3,000 net new stores Starbucks plans to open throughout the next five years, the company plans to renovate thousands of its existing stores. At least half of the new stores are expected to be in the strong, rapidly growing U.S. market where revenue grew by 9% in fiscal 2012. Cliff Burrows, president, Starbucks Americas and U.S., plans to leverage the recently completed acquisition of juice maker Evolution Fresh and La Boulange bakery — and to increase sales and drive customer frequency throughout the day — by making La Boulange baked goods available in more than 2,500 U.S. company-operated Starbucks stores and making Evolution Fresh juices available in more than 5,000 U.S. company-operated stores by the end of 2013.
Starbucks’ ambitious growth strategy goes beyond the United States. The company has big plans for Asia. Starbucks China and Asia Pacific is the company’s fastest growing retail store market, and is expected to approach 4,000 stores by the end of 2013, including 1,000 in Mainland China, 1,000 in Japan, 500 in Korea and its first store in Vietnam. In fact, with China being Starbucks’ most successful new market entry to date, it is expected to become Starbucks largest market outside of the U.S. by 2014 and is on schedule to have 1,500 stores in 70 cities in 2015, according to president of Starbucks China and Asia Pacific John Culver. At the conference, Culver also provided an overview of the hugely successful opening of the company’s first three stores in Mumbai, India, opened since October, and reaffirmed plans to open the company’s first store in Delhi in early 2013.
Not faring as well as the Asian market, and amid controversial corporate tax woes in the U.K., Starbucks Europe, Middle East and Africa plans to build brand relevancy, unlock opportunities in its company-operated stores and accelerate licensing agreements in the region. “Our past performance is not indicative of the sizable and profitable opportunity across EMEA. We have a comprehensive set of initiatives that will build on our investments over the past decade to ensure sustained and healthy profitability for the region,” said Starbucks Europe, Middle East and Africa president Michelle Gass. In the U.K. portion of its European market, Starbucks has acknowledged publicly that it must regain the public’s trust. To that end, Starbucks is expected to make a pledge to pay its share of U.K. corporate tax, and to issue a statement addressing the matter as early as December 6.
Another noteworthy revelation at the conference was Starbucks’ dramatic growth in consumer package goods business. In the two years since Starbucks outlined plans to leverage innovation, its global retail store footprint and its social and digital media expertise to drive accelerated growth in the company’s consumer packaged goods business, Starbucks Channel Development has become the company’s second largest operating segment, growing 50% to $1.3 billion in revenue in fiscal 2012. Even faster growth is expected in Channel Development, which is expected to double its international footprint by 2015, building on its more than 100,000 points of distribution in 20 countries, and to eventually rival Starbucks retail store portfolio in terms of size and profitability. The company also plans to expand its My Starbucks Rewards customer loyalty program to enable customers to earn Starbucks stars, redeemable for free beverages and food at Starbucks retail stores, when they purchase Starbucks-branded products in CPG channels. When the expanded program launches in 2013 it will be the first, and most innovative, cross-channel customer loyalty program in the world, according to Starbucks Channel Development and Emerging Brands president Jeff Hansberry.
Starbucks also expects to take the global tea market by storm. The company, which already offers Tazo tea, reiterated plans to vault itself into a leadership position of the $40 billion global tea market with its intended acquisition of Teavana, announced November 14. Starbucks plans to offer over time handcrafted Teavana tea beverages at Teavana mall and neighborhood stores and eventually at Starbucks stores. Once the acquisition is complete, Starbucks and Teavana will together jumpstart the next wave of growth in the tea category, leveraging Starbuck’s core competencies in handcrafted beverage, real estate and design and integrating these with Teavana’s world-class tea authority, merchandising and best-in-class retail store unit economics. Powered by its existing infrastructure, Starbucks plans to continue to grow and extend Teavana’s already-successful 300 mall-based stores as well as add a high-profile neighborhood store concept that will accelerate Teavana’s domestic and global footprint.
Beyond retail store and CPG channel developments, Starbucks described how its digital and loyalty platforms and initiatives are transforming the way it connects with customers, strengthening brand relevance, delivering greater value and convenience to consumers - and producing greater profits for shareholders. Chief digital officer Adam Brotman described how the company’s social, web, mobile, loyalty and card assets differentiate Starbucks from any other retailer and combine to directly drive growth across the company’s business and around the world. Brotman announced that Starbucks cards are now used in approximately 25% of the company’s U.S. transactions and that the amount of dollars loaded on Starbucks cards increased by more than 20% last year. He also expects the company’s mobile payment platform to account for 10% of payments in Starbucks U.S. stores by the end of fiscal 2013.