Starbucks delivering in more ways than one

by Monica Watrous
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Starbucks is debuting a mobile order-and-pay platform in December.

 

SEATTLE — Consumers want convenience, and Starbucks Corp. intends to deliver —literally. Executives at the coffee company on Oct. 30 revealed plans for food and beverage delivery in select markets later next year.

“Imagine the ability to create a standing order that Starbucks delivered hot or iced to your desk daily,” said Howard Schultz, chairman, president and chief executive officer of Starbucks, during a conference call with analysts to discuss fiscal year performance. “That’s our version of e-commerce on steroids.”

In the meantime, the chain is unveiling a mobile order-and-pay platform that will enable customers to place orders in advance for pickup at a selected Starbucks location. The program will debut in Portland, Ore., in December and roll out nationally throughout next year.

“Starbucks’ Mobile Order and Pay is a totally unique technology,” Mr. Schultz said. “It seamlessly integrates mobile ordering and our proprietary loyalty program with point-of-sale and store operations, enable us to enhance our customer experience, exceed our customers’ expectations of convenience, and extend customer loyalty. And as we will see in a few weeks, no company in any industry offers any technology remotely like Starbucks’ Mobile Order and Pay; plus, we get the added benefit of increased store throughput and speed of service for all our customers.”

Another initiative under way leverages Starbucks’ premium positioning. The company is set to open its first tasting room in Seattle, which will enable the expansion of the Starbucks Reserve coffee line to 1,500 locations worldwide with plans to open 100 stores designed to highlight the rare roasts.

“The roastery will shine a bright light on everything Starbucks,” Mr. Schultz said. “It will seamlessly integrate coffee roasting and food, beverage and merchandise retailing into an immersive consumer experience that showcases Starbucks coffee heritage, the craft of small-batch roasting, and innovative new coffee brewing methods, culminating in each cup of coffee being handcrafted right from the roastery. We will combine the beauty and romance of super-premium, micro-lot coffees with moments of connection and discovery for our customers. But perhaps the greatest value of the roastery is that it will anchor a new Starbucks super-premium coffee sub-brand, Starbucks Reserve.”

Moving into 2015, Troy Alstead, chief operating officer, said the company’s food program will be focused on growing the success of its breakfast sandwich effort and evolving the lunch program by introducing new items.

“We’ve had a record breakfast sandwich year, and that’s grown by about 30%,” said Matt Ryan, global chief strategy officer. “Lunch has grown by 14%; I think we’ve only just started there. So year on year, food is growing, and it is definitely helping check as is beverage mix as well.”

Net earnings attributable to Starbucks for the fiscal year ended Sept. 28 increased to $2,068.1 million, equal to $2.71 per share, up sharply from $8.3 million, or 1c per share, in fiscal 2013. Fiscal 2014 performance includes the impact of a litigation credit and a net benefit from fourth-quarter transactions. Fiscal 2013 results include the impact of the litigation charge associated with the arbitration with Kraft Foods, as well as gains on sales of equity in joint ventures in Mexico, Chile and Argentina.

Net revenues climbed nearly 11% to $16,447.8 million from $14,866.8 million the year before.

“Starbucks performance in fiscal 2014 was extraordinary by any metric or comparison, and the results remain even more stunning by the fact that they were achieved in the face of continued challenging retail and consumer environments, the accelerating shift in consumer behavior from bricks and mortar to e-commerce purchasing, and on the heels of 7% comp growth in fiscal 2013,” Mr. Schultz said.

During the year, global comparable store sales advanced 6%, driven by increases of 6% in the Americas, 5% in the Europe, Middle East and Africa region, and 7% in China and Asia Pacific. Starbucks opened 1,599 net new units worldwide during the year, which included 698 in the Americas.

For the fourth quarter, net earnings attributable to Starbucks were $587.9 million, equal to 77c per share, which compared with a loss of $1,232 million in the prior-year period.

Revenues totaled $4,180.8 million, up 10% from $3,788.8 million in the comparable quarter.
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