NEW YORK — Organic soups, a gluten-free breakfast sandwich and a smoked butterscotch latte are coming to Starbucks restaurants in 2017.
Food and beverage innovation is a key piece of Seattle-based Starbucks Coffee Co.’s five-year plan, which executives shared with the investment community during the company’s biennial investor conference on Dec. 7 in New York. Over the next five years, Starbucks plans to grow revenue by 10% and earnings per share by 15% to 20% and drive mid-single digit same-store sales growth each year, fueled by new product development, said Sharon Rothstein, executive vice-president and global chief marketing officer.
|Sharon Rothstein, executive vice-president and global chief marketing officer for Starbucks|
“The power of Starbucks’ innovation muscle has been our ability to build and grow mega-platforms, platforms that meet broad-based, untapped customer demand and have been extended over time and in many channels all around the world,” Ms. Rothstein said. “As far back as the Starbucks latte, our premium breakfast sandwich, and more recently, Starbucks cold brew are but just a few examples of the iconic businesses that we’ve built and now play a very meaningful role in the daily lives of our customers.”
Starbucks Reserve Roastery in Seattle, which opened two years ago and is described by the company as a “dynamic and immersive coffee-forward retail experience,” has become a testing ground for coffee innovation, Ms. Rothstein said.
“With thousands of customers visiting the Roastery every single day, we have the ability to test, learn, and then quickly scale our new customer favorites to all of Starbucks’ stores,” she said. “This is unique really to Starbucks and no other competitor can do it at our scale.”
Two coffee concepts to come out of the Seattle Roastery are launching in U.S. stores in January. A returning “customer favorite,” the smoked butterscotch latte, combines espresso with smoked butterscotch and a dash of spice. The new Cascara latte, made from the fruit of the coffee cherry, features subtle notes of dark brown sugar and maple.
“It is a subtly sweet latte that really leans into our customers’ desire for less indulgent beverages,” Ms. Rothstein said. “But these are just two examples and only the beginning of how we will look to use the Roastery for continued espresso innovation.”
Starbucks also is expanding its cold beverage offerings, which are projected to represent 50% of the company’s beverage mix by 2021, up from over 35% in 2013. Cold brew coffee, which Starbucks introduced in 2015, is now a $140 million platform in the United States, Ms. Rothstein said.
“We have now successfully expanded it with Vanilla Sweet Cream and just a few short weeks ago, in time for our holiday season, Spiced Sweet Cream,” she said. “The cold brew platform is being extended across the globe, and we believe there is huge potential also in R.-T.-D. (ready-to-drink).”
Beyond beverages, Starbucks has big plans for food innovation, which Ms. Rothstein said represents the largest growth opportunity for the business.
“We have already grown the food business by 1.5 times since 2013, and looking forward we plan to double the business by the year 2021,” she said. “The significant growth will come across all day parts and can be achieved by offering our customers delicious, high-quality food; driving enterprise-wide innovation that leverages both our accessible footprint and the significant store traffic we have; and filling our customers’ needs for convenient health-and-wellness-forward meals and snacks.”
Breakfast sandwich sales have nearly doubled in the past four years and now account for close to 40% of total food sales, she said. Starbucks will enhance its morning menu with new Sous Vide Egg Bites beginning in January and a certified gluten-free breakfast sandwich in the spring.
“We always believed that there was an opportunity for a delicious, handheld product that better addressed health-and-wellness demands, and we are excited to say that this January we will have a breakthrough innovation platform to address this very opportunity: Sous Vide Egg Bites,” Ms. Rothstein said. “They are grab-and-go, wheat-free, wholesome, an excellent source of protein. They are unbelievably delicious and we think they will be a massive opportunity for us.”
Starbucks plans to accelerate lunch sales, which already have increased at a compound annual growth rate of 15% since 2013, with new organic soups, bistro boxes and improved salads.
“With approximately 50% of the traffic occurring after 11 a.m., you can see by driving attach at lunch with new and existing products, it’s a big business opportunity for us,” Ms. Rothstein said. “But, frankly, that’s just the start. To fully embrace the lunch day part, we need to lean in, test, and evolve even more and we recognize we can unlock a significant opportunity in lunch by going beyond their current menu and our current system. So early this summer we will test a very exciting opportunity in lunch by answering what our customers are looking for from Starbucks: fresh grab-and-go lunch choices to meet the demands of their on-the-go, healthy lifestyles.
“This endeavor begins with a strong culinary point of view inspired by California cuisine and built from three core tenets: elevated and customizable grab-and-go meals, including composed salads, sandwiches, and desserts pots, made fresh, delivered daily, and packaged beautifully in our stores and in sync with our customers’ desire for protein-forward, high veggie meals.”On retail shelves, new products slated to launch in 2017 include Bottled Starbucks Cold Brew Cocoa and Honey with Cream and ready-to-drink Teavana Craft Iced Teas in such flavors as pineapple berry blue herbal tea, peach green tea, mango black tea, and passion tango herbal tea.