Another Starbucks may soon pop up around the
corner, with the world's biggest coffee company planning to add at least
1,500 cafes in the U.S. over the next five years.
The plan, which would boost
the number of Starbucks cafes in the country by about 13%, was
announced at the company's investor day in New York Wednesday.
In addition, the
Seattle-based company says it will eventually serve a new brand of tea
in its cafes. Rather than its Tazo tea, Starbucks is turning its
attention to Teavana, which it announced it would acquire last month.
Worldwide, the company says
it will have more than 20,000 cafes by 2014, up from its current count
of about 18,000. Much of that growth will come from China, which the
company says will surpass Canada as its second-biggest market.
Although Starbucks has been
intensifying its growth overseas and building its packaged-goods
business back at home, the majority of its revenue still comes from its
more than 11,100 cafes in the United States.
In an interview ahead of
its investor day, CEO Howard Schultz said the U.S. expansion plans are
based "on the current strength of our business"
Just a few months ago, the company had predicted it would open just 1,000 new cafes in the country over the next five years.
The upbeat expansion plans
mark a turnaround from Starbucks' struggles during the recession. After
hitting a rough patch, the company brought back Schultz as CEO in 2008
and embarked on massive restructuring effort that included closing 10%
of its U.S. stores.
Cliff Burrows, who heads
Starbucks' domestic business, said the problem wasn't that Starbucks was
oversaturated, but that the company hadn't been careful about its store
openings. In the years leading up to the downturn, the company was
opening well over 1,000 stores a year. That led to cafes in locations
where signs or traffic might not be optimal, he said.
Burrows said Starbucks has gotten more sophisticated, and noted that the cafes opened in recent years are among the company's best performers.
Sales at new cafes are
averaging about $1 million a year, for example, above the company's
target of $900,000. It costs about $450,000 to build a new cafe.
Since Starbucks already has
a broad footprint, the company's expansion is intended to "deepen" its
presence with additional stores in markets across the country, said Troy
Alstead, Starbucks' chief financial
officer. That means establishing stores - including drive-thrus and
smaller cafes - in more convenient locations for customers. And even as
it expands, Starbucks said it expects to maintain growth at cafes open
at least a year. The figure, a key metric of health, has ranged between
7% and 8% globally in the past three years.
The continued sales growth
in the U.S. will be fueled by the new products, such as Evolution
premium juices and Via single-serve coffee packets. Looking forward,
Starbucks is also looking to improve its food menu and is testing a new
menu of baked goods from La Boulange, a small San Francisco-based chain
it acquired earlier this year. The new croissants, loaf cakes and other
items will spread to about 2,500 cafes next year and go national
sometime in 2014, Burrows said. The company says only about a third of
customers currently buy food with their drinks.
In a test aimed at building
sales in the evening hours, the company also started serving beer and
wine at about a dozen locations earlier this year, with food such as
chicken skewers and dates wrapped in bacon.
And most recently,
Starbucks announced plans to acquire Teavana, a chain that has 300
locations in shopping malls. When the announcement was made last month,
Schultz said the company would "do for tea what it did for coffee."
That includes plans to
expand Teavana's presence beyond the shopping mall with stand-alone
shops that have "tea bars" that serve specialty drinks. The company
declined to say when Starbucks cafes would begin serving Teavana drinks -
and it hasn't decided on whether it will continue to sell Tazo in
To build its packaged-goods
business, Starbucks plans to let customers earn points on their My
Starbucks loyalty card starting next year when they purchase Starbucks
bagged coffees in supermarkets and other outlets. Customers currently
earn points only when they make purchases in Starbucks stores.
The picture isn't rosy
around the globe, however. Europe remains a sore spot for Starbucks,
with a key sales figure falling in the region 1% during the latest
quarter. In an effort to boost results, the company has been closing
underperforming stores and licensing of some of its cafes in the region.
2012 The Associated Press. All rights reserved. This material may not
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