Starbucks sees more potential in food

by Eric Schroeder
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Starbucks breakfast sandwiches
Breakfast sandwiches have seen notable growth at Starbucks since their roll-out.

SEATTLE — Executives at Starbucks Corp. don’t believe the company has reached a saturation point on how much it can grow food sales.

Kevin Johnson, Starbucks
Kevin Johnson, president and c.o.o. of Starbucks

“I think we’ve seen very good growth of our breakfast sandwich lineup,” Kevin Johnson, president and chief operating officer, said during a July 21 conference call with analysts to discuss third-quarter financials. “We are seeing increased attach of food. I think if you look at each day part, there are opportunities in every day part for us to do more around food, and I think we recognize that is one of our seven core strategies for growth.”

Mr. Johnson said Starbucks’ work in research and development and innovation stands out as a way the company can continue to grow its food business.

During the third quarter, food contributed 1 percentage point of comparable store growth, Mr. Johnson said, down from 2 points of growth during the second quarter. Despite the decline, he said Starbucks still is seeing good comp growth coming from food and believes “there’s more we can do there.”

Starbucks bakery case items
Baked goods from La Boulange have seen success at Starbucks.

Cliff Burrows, group president for U.S. and Americas at Starbucks, added the growth in breakfast sandwiches and the morning day part in general continues to get “stronger and stronger.”

Cliff Burrows, Starbucks
Cliff Burrows, group president for U.S. and Americas at Starbucks

“The opportunity is to provide choice, variety and a competitive approach around lunch and later day parts,” Mr. Burrows said. “We have started our journey — if I remember back, rolling out breakfast sandwiches I think took us several years. The growth we have seen since we brought in the baked goods at La Boulange and the enhancements to the quality and the choice of breakfast sandwiches gives me every confidence that we will continue on this journey. Twenty per cent of our sales are now coming from food. It’s a great opportunity for the future, and we are working hard on it.”

Starbucks earlier this month announced a partnership with Princi, a high-end Italian bakery and cafe founded by Rocco Princi in 1986. As part of its investment, Starbucks will focus on developing and operating new Princi locations outside of Italy, as well as offering Princi’s baked foods in its new specialty coffee shops, including the new Starbucks Reserve Roastery and Tasting Rooms in Shanghai and New York. The Shanghai and New York Roastery locations are on track to open in 2017 and 2018, respectively.

Princi baked products, Starbucks
As part of its investment in Princi, Starbucks will offer Princi’s baked foods in its new specialty coffee shops.
 
Net income in the third quarter ended June 26 was $754.1 million, equal to 51c per share on the common stock, up 20% from $626.7 million, or 41c per share, in the same period a year ago. Net sales increased 7% in the quarter to $5,238 million, up from $4,881.2 million.
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READER COMMENTS (2)

By George Thomopoulos 7/28/2016 9:36:04 AM
We need more Innovation in food areas, not the same old same...

By George Thomopoulos 7/28/2016 9:34:37 AM
We need more Innovation not the same old same!..