La Boulange boosts Starbucks’ food platform

by Eric Schroeder
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SEATTLE — Food is the key component to momentum at Starbucks Coffee Co., and to that end, the Seattle-based company is making “great headway,” said Troy Alstead, chief operating officer.

In an April 24 conference call to discuss second-quarter earnings, Mr. Alstead said La Boulange has “significantly” improved the quality of Starbucks’ bakery offerings. Starbucks acquired San Francisco-based Bay Bread, L.L.C. and its La Boulange bakery brand for $100 million from management and an investment group, Next World Group, in 2012. Since that time, Starbucks steadily has been introducing La Boulange across its outlets.

Mr. Alstead said La Boulange has been introduced into 6,000 U.S. company-operated stores and another 2,500 licensed stores. The brand is driving results, he said, helping the food category contribute 2 percentage points of comparable growth in the second quarter.

“We continue to make enhancements throughout the lineup, and, as a result, as we expand to new cities and leverage the operational earnings from those before, we see stronger and stronger results after launch,” he said. “We remain on track to complete the bakery roll-out across all U.S. company-operated stores before the end of September. And thanks to the strong result and demand from our licensees, we will complete the roll-out across all U.S. licensed stores this year as well.

“Add to this our successful new breakfast sandwich offerings, which launched nationwide March 4, and have already lifted sales of those products by nearly 50%. As our bakery roll-out completes, we will turn our attention to food and other day parts, including lunch. We have significantly advanced our lunch program of bistro boxes, panini and salads over the past few years. But there is a much larger prize here, and we’re ready to go after it.”

The bakery roll-out has not been without its hiccups, though. There was some consumer pushback after several sliced loaf products were pulled from menus at the locations that had begun serving La Boulange baked goods. But Starbucks quickly responded by reintroducing the sliced loaf items. Mr. Alstead said the media attention to the sliced loaf change was a bit overblown.

“It is natural and normal in any major system roll-out we do … that we’ll always do learnings and check and adjust,” he said. “Most importantly, focused on, ‘What are we hearing from our customers?’ And if there’s a place for us to respond, we will do that. It’s important to note that there is nothing more that we’re doing in La Boulange than we do in any of those roll-outs historically.”

Cliff Burrows, group president of U.S. and Americas, added the company has been delighted with the progress of the La Boulange roll-out, especially given the challenge of transforming its food business in such a short time.

“We set ourselves a two-year time frame to roll this out across the whole of the U.S., to put in a consolidated food platform, distribution channels and transform the way we deliver food to our customers, and we have learned a great deal,” Mr. Burrows said. “One of the advantages with having this in-house capability is we can check and adjust very, very quickly. Each roll-out we have done has gotten stronger than the one before. The ones that we rolled out since the turn of the year have been absolutely fantastic.

“We have listened to the customers. Sometimes we will change the ingredients. Sometimes we will change the shape of the products. In our stores next week will be the new ingredients in a familiar form for Lemon Loaf Cake, which I think will be extremely well received. Add to that the strength of the breakfast sandwich platform. We’re up 150%. And add to that a fantastic response that we have had to the croissant. We are really, really pleased with it and we’re building a new capability.”
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