Making food a force at Starbucks

by Josh Sosland
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Executive details plans for growth in later dayparts.


Food sales at Starbucks Corp. in the United States are projected to account for 25% of sales in fiscal year 2019 from 16% in fiscal 2010, said Cliff Burrows, Group President, U.S., Americas and Teavana. Speaking Dec. 4 at the company’s biennial investor day in Seattle, Mr. Burrows said the company’s next major step toward this objective will be expanded menu choices aimed at capturing a larger share of the lunch market.

“That is really, really important,” Mr. Burrows said of gaining share within the $95 billion lunch business. He estimated Starbucks’ current share as roughly 2%.

“Now we’re going to continue to up-level our offer,” he said. “We’re going to introduce proven winners, and we’re going to take a really disciplined approach so that we limit and minimize the disruption for our store partners and for our customers.”

The source of this promised discipline and Mr. Burrows’ optimism has been the success enjoyed by Starbucks in its roll-out over the past two years of breakfast baked foods sold under the La Boulange brand (named for a San Francisco area bakery acquired by Starbucks in 2012).

Mr. Burrows noted the roll-out had only just begun when he last spoke at a biennial investors meeting.

“We’re now serving those La Boulange products in more than 11,000 stores in the U.S., both company-operated and in our licensed portfolio,” he said. “And that has helped us put in place a platform and a capability, which gives me the confidence that we can continue to grow food across the U.S.”

Thanks to La Boulange, comparable store food sales grew by 2% in fiscal 2014, Mr. Burrows said. The same elements will be key to future growth at breakfast as well as at lunch, he said.

“The biggest opportunity is still lying with breakfast sandwiches and to convert existing beverage-only customers in our stores in the morning peak to buy our food,” Mr. Burrows said. “And in the last quarter of fiscal 2014, we saw breakfast sandwiches grow by 30%.”

Central to that fourth-quarter growth was the introduction of two new breakfast sandwiches, Mr. Burrows said.

“What it showed us is an incredible interest in warm sandwiches and our existing warmed offerings in that lunchtime period,” he said. “And it gives us the confidence that Starbucks is relevant at lunchtime; and we can really play a part to satisfy a need our customers have.

“We also see that what is really important, again, it starts with quality ingredients. It is variety, it is just the selection we have and it is obviously the taste that the customers enjoy. And if we can capitalize on these differentiators within our lunchtime offering, we’re really confident we can capitalize on the traffic that is already in our stores, and we can develop into the multiple grab-and-go opportunities for snacking occasions throughout the day.”

If sandwiches will play a key role in building the Starbucks lunch business, wine will play a pivotal role in traffic growth during the evening, the slowest part of the day for the company, Mr. Burrows said. The objective, he said, is to extend the company’s “third place” identity into a desirable venue for evenings “where customers can come, relax, connect with friends or be alone in a safe, comfortable and sophisticated environment.”

Toward this end, wine is not intended to play a center-stage role, Mr. Burrows said.

“Wine is the legitimacy for the occasion,” he said. “It helps it be seen as an adult occasion, this place where they can go as individuals, read a book, enjoy food, enjoy tea or as a group enjoy wine. It’s also helping us sell not only the wine, but our core beverage offerings and unique food. We see the opportunity by fiscal 2019 to have delivered an incremental $1 billion as we will have rolled out evenings to about 2,000 stores in the U.S., about 20%, 25% of our portfolio. And I think this is a really good example where we can innovate around occasion and it goes far beyond innovation around product.”

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