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    Starbucks is Getting Greener, and Spending $100M on Startups

  • This coming year, and beyond, turns a focus to innovation.

    Starbucks
    Starbucks is phasing out plastic straws by 2020.

    Starbucks’ annual meeting of shareholders Wednesday didn’t lack for big announcements. Perhaps none larger—or at least more expensive—than the $100 million commitment to Valor Siren Ventures. The company will serve as a growth driver for the next generation of food and retail start-up technology companies, Starbucks said.

    Managed by Chicago-based Valor Equity Partners, the same company that previously invested in Tesla, the new fund “will identify and invest in companies that are developing technologies, products, and solutions relating to food or retail.”

    Starbucks said these kinds of verticals are increasingly relevant to its business as it dives deeper into innovation. The $100 million cornerstone commitment is the first of its kind for VSV as it looks to raise another $300 million in the coming months from other strategic partners and institutional investors.

    READ MORE: Why Starbucks adding 1 million Rewards members in one quarter is just the beginning.

    Starbucks also plans to explore direct commercial arrangements with these start-ups. “We believe that innovative ideas are fuel for the future, and we continue to build on this heritage inside our company across beverage, experiential retail, and our digital flywheel,” CEO Kevin Johnson said in a statement. “At the same time, and with an eye toward accelerating our innovation agenda, we are inspired by, and want to support the creative, entrepreneurial businesses of tomorrow with whom we may explore commercial relationships down the road. This new partnership with Valor presents exciting opportunities, not only for these startups, but also for Starbucks, as we build an enduring company for decades to come.”

    In Valor’s 20-year history, it has worked with companies in the consumer, engineer products, and service sectors. Past examples include goPuff, Fooda, and Sizzling Platter.

    Starbucks

    Initiatives, like Starbucks Delivers, will be geared toward a changing customer.

    Sustainable coffee, served sustainability

    At last year’s shareholders meetings, Starbucks launched multi-year initiatives around greener cups and digitally traceable coffee.

    “Today thanks to many valuable collaborations, we’re seeing significant, tangible progress toward a greener future,” Johnson said Wednesday.

    Over the next year in several markets worldwide, Starbucks said, it will trial new, greener cups. More than 4,000 shareholders heard the news as they sipped from one of the fresh cup technologies. The tests will hit New York, San Francisco, Seattle, Vancouver, and London in an effort to find a cup that’s recyclable and compostable in those municipalities’ facilities. The chain will choose the cup technologies from NextGen Cup Challenge winners announced earlier in March.

    Starbucks launched a NextGen Consortium last spring with Closed Loop partners, looking to identify cup technologies that could meet its sustainability goals on a global scale. A year later, the group includes founding member McDonald’s, along with supporting partners The Coca-Cola Company, Nestle, YUM! Brands, Wendy’s, and the World Wildlife Fund.

    Starbucks previously said it wants to double the recycled content, recyclability, and reusability of its cups by 2022.

    “It is with great intention that we move forward with highly collaborative and innovative work to bring both recyclable and compostable cups to scale around the world,” Johnson added. “We are reimagining the future for Starbucks, and for the more than 30,000 communities we serve each day, with a great sense of responsibility for a more sustainable planet.”

    Starbucks is rolling out new lightweight, recyclable strawless lids to all U.S and Canada stores in the next year. The move marks a key milestone as Starbucks works to phase out plastic straws from its more than 30,000 units worldwide by 2020. As announced in July, the change would eliminate more than 1 billion straws per year from the marketplace.

    The new strawless are headed to Los Angeles, San Francisco, Seattle, Washington, D.C., Indianapolis, and Toronto this summer, with the rest to follow by early 2020.

    These have 9 percent less plastic than the current lid and straw, Starbucks said. Frappuccino drinks and other blended beverages will continue to feature a different, domed lid made from recyclable plastic and be accompanied by a straw, except where local law prohibits it. Additionally, Starbucks is testing alternative material straws for blended beverages and exploring some of the NextGen options that could apply. Regardless, plastic straws will remain available for those guests who request them.

    The company unveiled another sustainability change. Starbucks is previewing a feature for its mobile app that allows customers to trace coffee’s journey from bean to cup. The reveal from Starbucks’ SVP of global coffee and tea, Michelle Burns, included an on-stage tasting of digitally traceable Starbucks Pike Place Roast. The package, in the future app feature, could be scanned to show its journey from origin to shelf.

    Starbucks is one year into a two-year project to explore the benefits of digital traceability.

    Starbucks

    Starbucks' Reserve locations have been show-stoppers.

    Reimagining ‘The Third Place’

    Roz Brewer, Americas group president and chief operating officer, showcased some of Starbucks’ efforts to evolve with customer’s changing needs. She said Starbucks would take a phased approach to modernizing the guest experience across all key touch points for customers, beginning this summer in New York City. Check out Starbucks’ NYC Reserve Roastery, complete with 60-foot mixology bar.

    “I don’t want anyone to walk away today thinking this is about furniture or a new renovation strategy,” Brewer said. “Reimagining the third place is about listening to our customers, so we can better position our business now and for the future.”

    The brand said this would include technology changes, product innovation, as well as new and reimagined store formats. Starbucks is also reiterating its commitment to programs like Starbucks Delivers, which is live in 12 countries, and Starbucks Rewards. The delivery program is scheduled to hit 2,000 U.S. locations by spring. As for rewards, Starbucks just announced upcoming changes earlier in the week, highlighted by a new tiered structure that replaces the current single option. The updates are set for April 16.

    One earlier hint of future innovation: Nitro, which is expected to reach all U.S. stores by 2019.

    “Our relationship with our customers starts the moment they think of Starbucks,” Brewer added. “They connect with us through their barista and the quality of what’s in the cup they take with them. Their third place is everywhere they’re holding our cup. No matter their journey, after leaving our stores, that feeling of comfort stays with them. And In an increasingly busy and on-demand world, it’s that feeling that keeps the third place growing.”

    More details on the store formats will be coming.

    Employees first

    Starbucks announced 100 pay equity in the U.S. for women, men, and people of all races “performing similar work,” at last year’s meeting. Wednesday, Johnson confirmed the initiative for 2019 and said China and Canada would become the first international markets to verify the fulfillment of the global commitment.

    Also last year, Starbucks revealed its Pay Equity Principles—equal footing, transparency, and accountability. China and Canada have joined to update country-centric best practices and address challenges to each market, Starbucks said.

    Here are some additional employee initiative updates:

    • Veterans and Military Spouses: With 22,000 hires to date, Starbucks is on track to well exceed its goal of 25,000 hires by 2025.
    • Opportunity Youth: Starbucks is on track to meet its goal of hiring 100,000 Opportunity Youth—defined by the U.S. Department of Labor as 16-24 year-olds not in school or in the labor force—by 2020, with 75,000 hired so far.
    • Partners in Pursuit of a Higher Education: The Starbucks College Achievement Plan—a model for access to higher education for employees in partnership with Arizona State University—has more than 12,000 scholars as of this year and more than 2,300 graduates since its launch in 2014. Through the Starbucks College Achievement Plan, partners earn a bachelor’s degree with tuition costs covered, without a further commitment to Starbucks. The program’s goal is 25,000 graduates by 2025.

    Financial changes

    Starbucks has returned $14 billion toward its previously announced commitment of $25 billion to shareholders in the form of share buybacks and dividends over a three-year period through fiscal 202.

    The company said Wednesday, as part of this commitment, it entered into a $2 billion accelerated share repurchase program of Starbucks’ common stock. Initial delivery of shares represents about 80 percent of the total shares estimated to be repurchased under the program, which is expected to be completed no later than June 2019.