Industry News | December 2, 2010
Starbucks Charts the Course for Future Success
Starbucks detailed strategies for its next phase of growth at the company’s biennial Investor Conference. Building on its continued strength in attracting global consumers to its stores and growing its business in that critical channel, Starbucks senior leaders outlined plans to create a multifaceted, global consumer brand and the significant potential to achieve a greater share of the nearly $145 billion world coffee market with a renewed focus on innovation and expansion.
Starbucks chairman, president, and CEO Howard Schultz outlined plans to create long-term shareholder value. “We are building a solid and secure foundation for profitable growth in both new and existing businesses,” Schultz said. “Our next phase of growth will come from extending the Starbucks Experience to our customers beyond the third place to every part of their day, through multiple brands and channels. Starbucks U.S. retail business and our connection with our customers form the foundation on which we build all of our lasting assets, and we will combine that with new capabilities in multiple channels to accelerate the model we’ve created that no other company can replicate.”
Addressing the “myth of U.S. saturation,” Cliff Burrows, president of Starbucks Coffee U.S., outlined the continued sizable opportunity for profitable growth in the U.S. retail business. Growth will come from existing stores through increasing capacity and expanded day-parts, and through innovative store segmentation, with new concepts and formats in strategic locations.
“We’ve improved store-unit economics in a significant way over the past two years,” Burrows said. “We now have the opportunity to apply these broad-based improvements to retail expansion, as we engage customers through targeted initiatives such as My Starbucks Rewards and Starbucks Digital Network, create capacity at peak hours, and capture more day parts.” Burrows also noted that, while the company will not add stores in the U.S. at the pace it once did, it will seek out new locations in targeted neighborhoods to capture significant retail growth opportunities, focusing on opening one store at a time.
Retail growth outside the U.S. is also central to the company’s strategy, withStarbucks International in the first year of a multiyear transformation based on the successful transformation of the U.S. business. “Strong fundamentals and customer demand provide the company with the foundation to accelerate growth into established markets, such as Canada and Japan, and new or emerging markets such as China, Brazil, India, and Russia,” said John Culver, president of Starbucks Coffee International. “We are particularly pleased with the response we’re seeing from our Chinese customers, and expect to operate at least 1,500 Starbucks stores in Mainland China by 2015.”
The company also announced plans to build a world-class consumer packaged goods (CPG) organization. Under the leadership of Jeff Hansberry, president, Global Consumer Products and Foodservice, Starbucks is creating an infrastructure that combines the best of Starbucks marketing and promotional expertise with best-in-class CPG capability. “By reaching customers in the most agile and efficient way across all categories, channels, and markets, Starbucks CPG business is becoming a high profit, important, and growing business, with global scale for Starbucks,” Hansberry said. “The new direct model has the ability to drive authentic and effective sampling, build true partnerships with our retail customers and build their trust, and introduce some Starbucks retail theater to the grocery aisle.”
As it continues to expand its retail and grocery footprint, Starbucks is also building stand-alone brands likeSeattle’s Best Coffee, which continues to grow its points of distribution and to make high-quality coffee more accessible than ever before. The brand is targeting growth with new products, including the recently launched Levels System, which is designed to reach new customers by simplifying the coffee-buying experience, and new concepts, such as its first Seattle’s Best Coffee Bar as part of a pilot project in Walmart Canada Supercenters.
Concluding the conference, Starbucks chief financial officer Troy Alstead said, “Starbucks has reached a critical juncture as we move from a high unit growth specialty retailer focused on coffee in our stores, to a global consumer company with diversified growth platforms across multiple channels. We are intent on capturing a larger share of coffee consumption, reaching consumers wherever and whenever they want great coffee.”
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