Sticking to what you do best

by Dan Malovany
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Starbucks took a risk by branching out of what it did best — selling coffee and beverages.

When Starbucks paid a “latte” money — $100 million in cash — for San Francisco-based La Boulange retail bakeries and its Bay Bread wholesale division three years ago, co-manufacturers for the coffee chain had reason to “vente” and be nervous. Would Starbucks eventually begin to produce an increasing number of its baked goods internally? Would the chain change its menu and stop selling what its co-manufacturers offered altogether?

In June, Starbucks answered these questions by announcing it would close all 23 La Boulange retail bakeries and the two manufacturing plants that supported the retail locations. Simply put, Starbucks took a risk by branching out of what it did best — selling coffee and beverages.

From a retail perspective, it can be a “tall” order to even take the relatively simple operational concept of selling coffee and grab-and-go foods and complicate it by adding breakfast sandwiches and more. However, Starbucks seems to have raised the level of difficulty even more by going from a mainly co-manufacturing-based supply model for its food to bringing much of the production in-house.

As every baker knows, selling baked goods is one thing. Making them is totally another. Starbucks maintains it still has a “grande” goal to grow its food business and deliver an incremental $2 billion in the next five years, but perhaps there’s a lesson to be learned. In some cases, maybe it’s best to let the experts — in this case, co-manufacturers — handle the production aspects and stick with what the chain does best: selling its signature beverages along with high-quality baked goods supplied by others.
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