Food Business News - August 7, 2018 - 8
Starbucks to expand in U.S.,
innovate in beverages
Starbucks is beginning
to explore how to use
cold foam to enhance its
SEATTLE - Starbucks Corp. will focus on new
store openings in middle America and
the South to expand geographically in the
United States. Expansions in U.S. menus
will come through beverage innovation.
"Our U.S. real estate strategy will be
driven by placing the majority of our new
stores throughout middle America and
the South, with careful consideration
of the format type," said Rosalind G.
Brewer, chief operating officer and group
president of Americas, in a July 26 call to
discuss second-quarter earnings. "More
than 80% of stores built in the next few
years will be drive-through as data (indicate) significant opportunities for store
expansion in higher-growth, lower-cost
markets, especially when considering
rising wages and occupancy costs."
Beverage innovation remains a focus for Starbucks as it adapts to changing
consumer purchasing patterns.
"While not yet enough to offset
declines in Frappuccino sales, we see
substantial accretive growth from draft,
refreshers, tea and cold brew platforms,"
Ms. Brewer said. "In general, consumer
demand for cold beverages has grown
from 37% of sales five years ago to more
than 50% of sales today. There is also
strong demand for customization,
including blonde espresso as an alternative to our bolder signature roast and
plant-based milk and cold foam for our
cold coffee and tea beverages."
She shared examples of beverage
Food Business News
"Cold foam is a cold froth skim
milk designed to be a perfect creamy
finish to our cold beverages," Ms. Brewer said. "Launched this spring, we are
just beginning to explore some of the
opportunities here as evidenced by our
latest offering, the salted cream cold
foam cold brew.
"Draft allows us to extend beyond
Rosalind G. Brewer, Starbucks Corp.
cold brew and has proven highly incremental, especially for occasional afternoon customers. We're accelerating this
platform to more than 2,800 stores by the
close of fiscal year '18, up to more than
6,000 stores by year-end fiscal year '19."
Starbucks also is exploring multitap systems to add customization and
innovation across tea and milk, she said.
In its Americas region, Starbucks
opened 180 net new stores in the third
quarter while comparable store sales
growth was 1%. Operating income of
$908.7 million was down 7% from $974.8
million in the previous year's third quarter. Revenues climbed 6% to $4,230.6
million from $3,991.9 million.
Companywide in the third quarter, net earnings were $852.5 million,
or 61c per share on the common stock,
were up 23% from $691.6 million, or 47c
per share, in the previous year's third
quarter. Consolidated net revenues grew
11% to $6,310.3 million from $5,661.5
million, primarily driven by incremental
revenues from the impact of ownership
change in east China, incremental revenues from 2,015 net new Starbucks store
openings over the past 12 months, favorable foreign currency translation and 1%
growth in comparable store sales.
"While we fell short of the expectations we had entering the quarter,
we've made measurable progress against
two commitments we've made to our
shareholders: to deliver predictable,
sustainable growth at scale and to create
meaningful increases in shareholder
value long into the future," said Kevin
R. Johnson, chief executive officer and
Starbucks opened 511 net new stores
in the third quarter and now operates
28,720 stores across 77 markets.
In Starbucks' China and Asia Pacific
region, operating income of $234.1 million was up 5% from $223.8 million in
the previous year's third quarter. Total
net revenues of $1,229 million were up
46% from $840.6 million, but comparable store sales slipped by 1%. In the
Europe, Middle East and Africa region,
operating income of $34.9 million was
more than triple the $9.8 million in the
previous year's third quarter. Net revenues of $275.4 million were up 10% from
For the first three quarters of the
fiscal year, Starbucks companywide
had net earnings of $3,762.8 million, or
$2.67 per share, which was up 80% from
$2,096.1 million, or $1.43 per share,
during the same time of the previous
year. Total net revenues over the first
three quarters were $18,419.9 million,
up 10% from $16,688.5 million. FBN
August 7, 2018