SEATTLE — Starbucks Corp. is doubling down on single-serve. In addition to inking a new agreement with Keurig Green Mountain, Inc. to sell K-Cups in more channels in North America, the Seattle-based company plans to launch branded pods for Nestle S.A.’s Nespresso machines in international markets later this year.
|Howard Schultz, chairman and c.e.o. of Starbucks|
“For years, customers have been asking us to produce Starbucks-branded Nespresso-compatible capsules so they could enjoy Starbucks quality in Nespresso varietals through their Nespresso machines, just as they do through their K-Cup brewers in North America,” said Howard Schultz, chairman and chief executive officer of Starbucks, during an April 21 earnings call with financial analysts. “We could not satisfy that demand because we had not yet cracked the code on roasting, grinding and packing Starbucks coffee in order to deliver Starbucks quality in a cup through a Starbucks-designed Nespresso-compatible capsule, but now we have.”
Beginning this fall, Starbucks will offer single-serve capsules for Nespresso machines in Europe, where, in some countries, single-serve represents more than 40% of all coffee consumed and where half of Starbucks’ customers own Nespresso machines at home, Mr. Schultz said.
|John Culver, group president of China/Asia Pacific, Channel Development and Emerging Brands|
“Beyond Europe, the big size of the prize is going to be in (China/Asia Pacific), and more importantly in China,” said John Culver, group president of China/Asia Pacific, Channel Development and Emerging Brands. “And we are going to continue to look at how we expand the single-serve opportunity as the only truly leading global premium coffee brand in Asia across our store footprint and really go after this opportunity as well.”
Starbucks’ new agreement with Keurig brings improved economics and increased operating flexibility, plus the opportunity to sell directly into complementary, profitable channels of distribution, including offices, universities and colleges, and hospitality. Starbucks has the leading U.S. market share of premium single-serve on the K-Cup platform, and the company expanded its market-share position during the quarter. This year, Starbucks expects to sell approximately 1.5 billion K-Cups, up nearly 20% over last year and representing multiples of K-Cup category growth overall, Mr. Schultz said.
For the second quarter ended March 27, Starbucks net earnings were $575.1 million, equal to 39c per share, up 16% from $494.9 million, or 33c per share, for the prior-year period. Net revenues totaled $4,993.2 million, up more than 9% from year-ago revenues of $4,563.5 million.
“In Q2, Starbucks’ powerful 24,000-store global retail operation again drove record financial and operating performance, including record revenues, record profits, a 7% increase in comp-store sales in the U.S., a 6% increase in comp-store sales globally, our 25th consecutive quarter of comp-store growth at or above 5%, and a stunning increase of 5% in transaction growth and 18% in revenue growth in China,” Mr. Schultz said. “And we remain on plan to end fiscal 2016 with approximately 25,000 stores globally.”For the six months ended March 27, Starbucks net earnings were $1,262.6 million, or 84c per share, down nearly 15% from $1,478.3 million, or 97c per share, for the same period of the previous year. Total revenues climbed nearly 11% to $10,366.8 million from $9,366.8 million.