Juice, baking business come into focus for Starbucks

by Keith Nunes
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SEATTLE – The Starbucks brand always will be synonymous with coffee, but juice, bakery products and tea will play more important roles in the company’s future.

Evolution Fresh juice products are currently in 2,400 Starbucks stores in the United States, primarily in the western part of the country. Later this year the company will open a juice processing facility in Rancho Cucamonga, Calif., that will quadruple its juice processing capacity and allow it to expand the Evolution Fresh brand further east.

“We are on track to open our new state-of-the-art juicery in late spring, which will further allow us to grow our plan to be in approximately 8,000 stores by the end of year,” said Jeff Hansberry, president of channel development, in a conference call with securities analysts on Jan. 24.

Howard Schultz, chairman and chief executive officer of Starbucks said the company’s roll-out of La Boulange bakery products also is expanding.

“Since our acquisition of La Boulange, we’ve been testing in our San Francisco Bay Area, and we continue to exceed an opportunity to plan, and drive incremental food sales,” he said.

The La Boulange products are currently in 40 Starbucks Bay Area test stores, but Mr. Schultz said the test will expand to throughout the Bay Area and to Seattle, Los Angeles, Chicago and New York in fiscal 2013.

The coffee chain closed on its acquisition of Teavana at the end of December and plans are under way to expand the Teavana brand throughout the Starbucks franchise.

“We will expand Teavana’s current 300 store footprint from largely mall-based stores to urban street locations, where Starbucks obviously has very strong capabilities, and ultimately we will reinvent the tea category, just as we did the coffee category 40 years ago,” Mr. Schultz said. “Teavana is the perfect complement to Starbucks’ current $1-plus billion Tazo brand, and will enable us to further extend our leadership position in the $40 billion global tea market.

“Earlier this quarter, we opened our first Tazo retail store in Seattle to serve as a learning laboratory and help us understand everything from what types of handcrafted tea beverages customers want to see from us, to help us to create a meaningful and differentiated retail tea experience for customers.”

In addition to the opportunities Starbucks sees in juice, bakery and tea, Mr. Hansberry added that iced coffee is emerging as a strong category for the company.

“Our partnership with Pepsi is thriving, and we plan to grow Starbucks’ share of the massive ready-to-drink category with the expansion of Starbucks Refreshers beverages, the introduction of our new line of Starbucks iced coffee in a new iconic single-serve glass bottle, which is rolling out as we speak in select U.S. markets,” he said. “We will have national presence by April, just in time for the warmer months. But know that nearly 50% of iced coffee drinkers actually enjoy iced coffee year-round. We will now be very well-positioned to serve the rapidly expanding demand for iced coffee in the U.S. In fact, now one in five beverages sold at Starbucks retail stores is a cold coffee beverage.”

For the quarter ended Dec. 30, Starbucks had earnings of $432.2 million, equal to 57c per share on the common stock, which compared with income of $382.1 million, or 50c per share, during the same quarter of the previous year. Revenue for the quarter was $3,799.6 million, up 11% from $3,435.9 million during the same quarter of the previous year.
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