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Starbucks grows revenue, transactions on strength of digital, innovation: 1Q 2020

Traffic growth boosts U.S. comp by 6 percent

Starbucks had an impressive quarter to start the fiscal year, capitalizing on investments in technology, continued new store growth, and a variety of formats and beverages. Central to its success is Starbucks’ use of technology and insight into customer data en route to a global comparable store sales increase of 5 percent during 1Q 2020. U.S. comparable sales were up by 6 percent, with transactions growing 3 percent. On the international front, comparable sales grew by 1 percent, with average check increasing 2 percent, and transactions down 1 percent.

Digital engagement, value in data drives business

During the quarter, the Starbucks Rewards program saw a growth of 16.9 percent from this time last year, to 18.9 million members. To extend more relevant offers to members, Starbucks gleans data from email addresses in its rewards program; in addition, the Rewards App can customize offers and specials around individual members’ preferences. In Q1 alone, the coffee chain added 1.4 million members.

Roz Brewer, chief operating officer & group president of Americas, revealed that Starbucks also taps more personalized data to help associates improve experience of customers in their coffee shops. This inside-store data use can be compared to processes employed by restaurants that use table reservation systems, using the data and information kept on VIP customers. Accessing more information on a customer helps a store not only personalize the experience, but also understand buying patterns and preferences.

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Brewer also noted that 2 percent of the comp growth was due to new member purchases. The Starbucks Rewards program helps the coffee chain build a relationship with customers by engaging them and enticing them into their coffee shops with new offers. She said, “We’re also seeing the loyalty programs in the new membership behavior that we’re seeing, which contributed two points of the 6% comp for the quarter.”

New equipment for speed of service, expanded drink variety

Sixteen hundred new espresso machines have been installed at Starbucks stores over the past year, to be followed by another 4,000 this year. All are equipped with AI to accelerate coffee preparation and help the chain expand its portfolio of hot and cold beverages. These machines could also help throughput as the coffee giant goes all-in with delivery, having reached a 75-percent penetration to-date in the United States with Starbucks Delivers.

Starbucks' investment in digital sales, loyalty, equipment, and design are paying off. Image by Starbucks (logo).
Starbucks’ investment in digital sales, loyalty, equipment, and design are paying off. Image by Starbucks (logo).

Technology is also boosting the cold coffee program. Executives saw success with limited-time additions of Pumpkin Cream Cold Brew and Irish Cream Cold Brew to the Nitro Cold Brew Line. The addition of Nitro equipment at more stores is a company priority: “So what you’re seeing right now is our execution of putting Nitro in every one of our buildings in the U.S.,” said Brewer. “And so that’s a big transition that we’ve made.”

Moving forward, the company seeks additional enhancements, including improvements in its existing cold brew equipment. Continuing to streamline throughput, Starbucks executives would like to put a stop to product depletion during periods of high demand. The arrival of a plant-based breakfast patty also looms large on the horizon; embracing this trend will help drive interest in the breakfast sandwich category. Moreover, Starbucks continues to expand its plant-based creamer line.

Innovation in store design is also propelling Starbucks forward:. the first mobile pick-up “convenience store” opened in November, and there will be more. With mobile order & pay now making up 17 percent of transactions, management is tasked with melding technology and design to attract a convenience-driven generation.

Photo credit: Starbucks

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