Starbucks Reveals Master Plan of Attack

In conjunction with Starbucks' 40th anniversary, the coffee chain released its plan for the future at its 20th annual shareholder's meeting. In front of an audience of 2,000, the Starbucks management team, led by Chairman, President and CEO Howard Schultz honored the company's 40-year history that he described as providing exceptional coffee, world-class customer experience, commitment to its partners and a dedication to operating as a responsible corporate citizen.

The Starbucks management team reaffirmed the growth plans for a "new, evolved business." The plan of attack was described as follows:

• building a truly global consumer company by harnessing a powerful portfolio of brands with a unique business model;
• combining a global retail footprint with a significant Consumer Products (CPG) business;
• and leveraging direct customer engagement that drives growth across all channels globally.

“Over our 40-year history, we have built the Starbucks brand with a goal of staying true to our values and our guiding principles with a deep sense of humanity,” said Schultz. “Going forward, we will continue to focus on what made us a different kind of company, one that balances profitability and social conscience while providing exceptional shareholder value.”

Key Components of Growth:

• Extend the brand beyond Starbucks retail stores
• Maximize international opportunities
• Provide record financials

Reaching Beyond the Retail  Segment

The company indicated that it would continue to grow its coffee in every format and through every channel. The quick-service coffee chain has had surprising success with its Starbucks VIA® ready brew product and recently announced strategic partnerships with Green Mountain Coffee Roasters, Inc. (GMCR) and Courtesy Products.

“We are particularly excited about the progress we are making in the premium single-cup segment,” said Jeff Hansberry, president, Starbucks Global Consumer Products and Foodservice. “The single-cup segment is already a $1.6 billion segment that represents a significant growth engine for the entire U.S. coffee category. We believe that over time we can generate K-cup portion pack system sales in excess of $1 billion across all channels.”

Through its partnership with Courtesy products, the nation's leading provider of in-room coffee service to hotels, Starbucks will bring coffee to 500,000 luxury and premium hotel rooms in the United States. Through its Consumer Products groups, the chain indicated it will offer Starbucks and Seattle's Best Coffee ground coffee in the single-cup brewing system, along with Tazo teas.

The company also announced a 10-year extension with current concessionaire partner HMSHost to build and operate locations in airports and motorway travel plazas across the United States, adding to the already existing 360 locations.

“For nearly 20 years, Starbucks and HMSHost have successfully brought the Starbucks experience to millions of travelers who are looking for an exceptional cup of coffee,” noted Cliff Burrows, president, Starbucks Coffee U.S. “We are very excited to extend our relationship with HMSHost for another 10 years.”

International

Starbucks leadership discussed the tremendous runway for international growth in the retail space as well as in CPG and foodservice channels not only in current markets but also in new and emerging countries. With recently announced plans to enter the India market, and continued successful growth in China where the company expects to have over 1,500 stores by 2015, Starbucks is poised to ramp up its burgeoning international business through disciplined store growth, improved operations, targeted innovation, local relevance in product and store design, and one-voice marketing.

“Even though we are not yet in every city and we’ve spent very little on advertising, Starbucks is recognized as one of the top 20 brands in China. Our ambition is bold; we expect to more than triple our foot print by 2015,” said Annie Young-Scrivner, Starbucks chief marketing officer.

The coffee chain looks to build upon the nearly 6,000 stores in 54 countries outside the United States.

Record Financials

The company reviewed a year of strong financial results and outlined the blueprint for continued success. Starbucks exited fiscal 2010 and entered fiscal 2011 with record-setting financial results driven by the return of top line growth and continued operational efficiencies that resulted in dramatic margin and earnings acceleration throughout the year.

“Starbucks is now playing from a position of strength, with a healthy financial foundation and renewed confidence from which we can pursue the abundant opportunities for growth,” Troy Alstead, Starbucks chief financial officer added. “We are intent on capturing a larger share of coffee consumption, reaching consumers wherever and whenever they want great coffee.”

Additionally, Starbucks highlighted its continued efforts to connect with customers in the digital and mobile space, creating a Fourth Place experience for ongoing engagement and future innovation. The company’s involvement with social media, leadership in loyalty and mobile through its Starbucks Card and My Starbucks Rewards programs were featured during the onstage presentation. The company also announced four new content partners to the in-store Starbucks Digital Network, all of which are offering free access to their subscription-level content to Starbucks customers.

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(03-23-11)

Source: Business Wire

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