Coffee chain bullish on future as it plans to unveil new innovative products
Starbucks Corporation executives are bullish on the future of the coffee chain. Based on discussions presented during its Investor Day 2020, management, including Roz Brewer, Starbucks chief operating officer and group president, Americas, presented the future of Starbucks in a positive light.
But there have also been challenges as a result of the pandemic. Global comp(arable) sales declined 9 percent in the chain’s fourth quarter from last year and also by 9 percent in the Americas. For full fiscal year 2020, global comp sales decreased by 14 percent and in the Americas by 12 percent.
Although Starbucks launched curbside pickup at many locations to increase convenience and appeal to the pandemic consumer, it also closed and restricted capacity at stores, sometimes voluntarily.
However, starting with fiscal 2021, the chain says it will post positive comp sales of 18 to 22 percent globally and 17 to 22 percent in the Americas. Starbucks also reaffirmed previous profit guidance: GAAP EPS in the range of $2.34 to $2.54 and non-GAAP EPS in the range of $2.70 to $2.90.
A digital-first strategy
The company continued steadfast on its mission to make deeper connections with consumers through its app (also monetizing these relationships) and digital flywheel tool, as well as digitize its business through its Pickup Stores, dedicated to pickup and delivery, and permeating artificial intelligence in its coffee machines and drive-thru menu boards.
As an example, enhanced drive-thru digital menu boards will handle suggestive selling, recommending items that have sold well at a particular store in a particular geographic area for similar-minded customers. These menu boards will also use store information to also promote menu items that help the shop’s inventory management.
Added Brewer, “This is where art and science come together so perfectly. Using the store’s information allows us to tailor what’s shown to the customer in the moment, increasing the likelihood of purchase, making their perfect order just one tap, gesture or phrase away and driving growth in the way that only Starbucks can authentically deliver.”
Regarding Starbucks Rewards, the company will leverage the 19M customers it has on a captive basis. According to Brewer, the giant has closer to 75M customers that recognize and engage with the brand in the United States. Enhancements to the Rewards Program, allowing customers to pay ondemand rather than on a prepaid basis, will lead to further engagement.
“…we fully expect higher levels of engagement going forward,” she sad. “This makes us incredibly optimistic about member growth for fiscal 2021 and beyond.”
Phantom brewer, hot opportunity in cold, new store formats
Another hot opportunity can be found in cold—cold beverages to be exact. The category has grown to 45 percent over the past four years, becoming a $1B business in the past three years. Brewer said that Millennials and GenZers are more likely to drink cold beverages and suggests this is the way of the future. Starbucks has traditionally been quick to adopt plant-based milks, including soy milk, almond milk, coconut milk and now oat milk.
To that point, a Shaken Iced Espresso will debut in the fall combining the healthy trend of plant-based milks with creative coffee expression. Baristas will combine espresso, brown sugar, and oat mlk, then hand-shake it for an artsy finish.
A more concentrated focus on its real estate strategy has led Starbucks to continue to pursue convenience-oriented format stores, including Pickup Stores and drive–thrus. Pickup and drive-thru formats will grow to the 45 percent of the portfolio. Meanwhile, traditional cafes will be reduced to 55 percent of the footprint from the current 65 percent.
In Midtown Manhattan, for example, store count, which stands at 214, could be reduced by two-thirds, while at the same time, the Pickup Stores subtotal could increase from one store to 15. Nationally, 80 percent of Starbucks on a pre-pandemic basis were to-go orders, creating a heightened opportunity for store formats geared toward pickup and delivery.
Also, a phantom brewer will debut next year. Four new espressos will be on the menu as part of a theater-like brewing process, which customers will be able to see and enjoy. The brewer will be manned by Starbucks partners (team members), who will be redeployed from food and drink preparation as it becomes more simplified via technology.
Photo credit: Starbucks (featured preview image)
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