Starbucks Can Smell Growth - pt 1

Two years ago, Starbucks was floundering. For the first time in its history, the company that made coffee part of our social scene saw U.S. same-store sales drop. Then the recession hit. Founder Howard Schultz, who had retired as CEO years earlier, took back the helm. His challenge: to rebuild Starbucks in the midst of a severe downturn.

Where do things stand now?

In any situation like this, there is no finish line. Having said that, we feel very positive about how we've transformed the company. We took out almost $600 million of cost. We closed underperforming stores. This has also been a dynamic period of innovation, with Pike Place Roast, the reinvention of food, the Starbucks rewards program and engaging with customers through social media. We are more nimble and disciplined, and customers are coming back. We are ready to start growing the company again.

Has the financial crisis permanently changed how people spend money?

People much smarter than me talk about the new normal. It remains to be seen how far the pendulum swings back, but I think one thing is true: consumer companies have a burden to provide real value and a compelling reason for a customer to be loyal.

In the fall, you started selling instant coffee in stores like Costco and Target, which is quite a departure. Why?

The largest segment in all of coffee is instant soluble--worth $21 billion worldwide--and it hadn't had any innovation to speak of, except for package design, in 50 years. The Frappuccino was born in Starbucks stores and then became a billion-dollar brand in bottles in the grocery channel, but that wasn't by design. Now, for the first time, we are going to market with a strategy that is much more comprehensive. We're just getting started with our portfolio of products.

But doesn't that mean competing in the grocery aisle against Procter & Gamble and Nestlé?

It's a humbling effort. We are the small, underdog company. But we think our product, our price point and the consumer interface we have from our stores give us a compelling proposition and an opportunity to do something others can't.

You've started selling another of your brands, Seattle's Best, in Subway sandwich shops. What's the strategy there?

Seattle's Best has been under the shadow of Starbucks, and as we began to transform the company, we realized that it should be managed for its own destiny. We think we're sitting on a billion-dollar brand, and we want to unleash Seattle's Best to do things that Starbucks can't do. It has more of a mass appeal. It's a more approachable coffee in terms of its taste. There are a number of [fast-food] companies that want to get into the breakfast business and don't have a coffee solution. Subway is just the first. 

Source: Times

 Starbucks International has a new president, and your last earnings call was held in London. Is it safe to say you're turning attention overseas? 

Yes. Our primary business in terms of revenue and profit is North America, and the issues we had to solve were primarily U.S.-based. That's where We've been laser focused. But we now feel in good shape, so we're going to shift a significant amount of resources to the growth and development of international business. Despite the fact that we're in 50 countries, with the exception of Japan and the U.K., we're in the embryonic stages. I've talked a great deal over the last couple of years about the fact that we're now profitable in China, but we're still significantly understored. That's one specific area of interest.

Starbucks is big on the social-networking scene. What have you learned?

People get information in all kinds of ways now, and companies can no longer talk at the consumer. You have to engage in a discussion and let people create, discover and share information and not just try to sell them things.

What has surprised you the most during your second go-round as CEO?

The past year and a half has reminded me in many ways of what it was like when we started the business. We weren't entitled to success, and we had to fight for business and respect. Over the past year and a half, that mentality returned.

Source: Times

Source: Starbucks Corporation
21/01/2010

Seattle, Jan. 21 - Starbucks Corporation announced today that it will enter the ready-to-drink (RTD) coffee category in Europe, an approximately US$550 million (EUR368 million) market.

Starbucks also announced today that it has signed an agreement with Arla Foods for the manufacture, distribution and marketing of Starbucks-branded premium RTD coffee beverages in Europe. This new relationship complements Starbucks coffee expertise and experience in the ready-to-drink coffee category.

“The success we have had bringing ready-to-drink coffee products to consumers in North America and Asia demonstrates the global potential of the business and we are proud to join with Arla Foods to bring our premium RTD beverages to consumers in Europe.”

Extending the Starbucks brand into new distribution channels globally is part of Starbucks long-term plans to target international growth in key regions such as Europe. “Starbucks Global Consumer Products business allows us to extend the Starbucks Experience to consumers beyond our retail stores while broadening our distribution channels globally,” said Rich DePencier, vice president, Starbucks Global Consumer Products International. “The success we have had bringing ready-to-drink coffee products to consumers in North America and Asia demonstrates the global potential of the business and we are proud to join with Arla Foods to bring our premium RTD beverages to consumers in Europe.”

Arla Foods is a leading producer and distributor of quality milk products in Europe and has more than 100 years experience of providing consumers with inspirational products that create well-being. Arla is one of the largest dairy companies in the world, with particularly strong markets in Northern Europe. Arla Foods will manufacture, distribute and market Starbucks premium milk-based ready-to-drink coffee beverages that are made with the same high quality arabica coffee blends that are used in the handcrafted coffee beverages available at Starbucks retail stores around the world.

”Starbucks is a super brand around the world, based on strong values and high quality products and we are very pleased about the fact that Starbucks and Arla will work together in the European RTD cold coffee business. The joint effort to grow the RTD cold coffee category where Arla Foods will produce, market and sell the Starbucks-branded RTD coffee beverages is a great opportunity for Arla and a strong match to Arla’s European strategy,” says Arla Foods’ CEO Peder Tuborgh.

Starbucks has a proven track record of creating successful RTD coffee products globally. Through a joint venture with PepsiCo, in 1996 the Company introduced Starbucks® bottled Frappuccino® coffee drinks and later Starbucks DoubleShot® espresso drinks. To date, these Starbucks coffee innovations remain the No. 1 products in their respective segments of the ready-to-drink coffee category in the United States. In 2005 Starbucks introduced Starbucks Discoveries® chilled cup coffees in Japan through an agreement with Suntory Foods, in 2007 entered Korea with the full line of Starbucks RTD products with Dong Suh Foods, and brought Frappuccino® coffee drinks to China and Mexico in 2008.

Starbucks Corporation

“Starbucks VIA® continues to excite customers and represents a significant opportunity for the company to expand our reach through a broadened coffee portfolio,” said Starbucks chairman, president and ceo Howard Schultz. “Consumers have quickly adopted Starbucks VIA® as their coffee while on the go. Whether it is brewed as a single cup before leaving the house, while traveling, or at the office, customers have found it is a convenient solution.”

Global Expansion Begins with U.K. and Japan

The nationwide U.K. launch of Starbucks VIA® on Monday, March 8, builds on the successful pilot in London and will introduce the U.K.’s 31 million coffee drinkersi to a high-quality instant and microground coffee. This launch comes on the heels of a successful local-market trial conducted in London; recognition in a survey by Allegra Strategies which voted Starbucks VIA® as the “Most Innovative New Product” in 2009; and the availability of Starbucks VIA® on all easyJet routes in early 2010.

Also this week, Starbucks Coffee Japan met with media, shareholders and partners (employees) to reveal that Starbucks VIA® Ready Brew will be available in all of Japan’s 870 Starbucks stores on April 14 under the name Starbucks VIA® Coffee Essence. The introduction of Starbucks VIA® Coffee Essence provides Starbucks the opportunity to create a new premium category in the Japanese home-use coffee market.

In its first year, Starbucks VIA® has helped Starbucks claim a larger piece of the overall global coffee market. Instant coffee makes up a majority of coffee purchases in many of the international markets where Starbucks has a retail presence, and represents 63 percent of total coffee sold in Japan and more than 80 percent of coffee drunk at home in the U.K. Together, these two markets account for more than $4 billion in instant coffee retail sales annually.ii Globally, instant coffee represents 40 percent of coffee sales, which translates into an annualized $21 billion and growing market.

Innovation and Expansion Continue in the U.S. and Canada

On March 9, Starbucks VIA® Ready Brew Decaffeinated Italian Roast will be available in Starbucks stores throughout Canada. It was introduced in the U.S. market late last year in response to customer requests. Starbucks VIA® is now available through more than 15,000 locations in the U.S. and Canada, including Company-operated and licensed locations, Costco, Target, REI, Omni Hotels & Resorts and online at Amazon.com, cooking.com, and officedepot.com. Additional channels are planned in the coming year.

Recognition for Online Sales and Product Review

Backpacker magazine recently named Starbucks VIA® Ready Brew as a recipient of the 2010 “Editors’ Choice Award.” Given annually to products in recognition of their outstanding innovation in design, materials and performance, the Editors’ Choice Award honors the best new gear and essentials for outdoor enthusiasts. In keeping with the belief that one should never be without great coffee, editors of Backpacker recently tackled the Swiss Alps with Starbucks VIA® in their packs. Even on a strenuous and remote 100-mile route, editors were able to enjoy the same high-quality Starbucks® coffee found in a Starbucks store. Backpacker Editor-In-Chief Jonathan Dorn and his staff of editors and testers presented the award to Starbucks on January 21 at the annual Outdoor Retail Winter Market in Salt Lake City, Utah.

In addition, Amazon.com recognized Starbucks VIA® Ready Brew as one of the top-selling products of the 2009 holiday season; this recognition is based on sales performance and customer satisfaction.

Source: http://www.flex-news-food.com/console/PageViewer.aspx?page=28827&str=coffee

Tokyo, April 13 - Starbucks sees the potential for thousands of stores in Greater China, where it currently has around 700, and is also keen on expanding in India and Vietnam, the head of the world's largest coffee retailer said.

"We've built 700 stores in Greater China in 10 years. I think the next 10 years will be greater than that," Chief Executive Howard Schultz told Reuters in an interview.

Schultz declined to comment on speculation that it would tie-up with Jubilant Foodworks for the Indian market Media had reported in late January that the two firms may form an alliance.

"At some point in the near future we will make the right announcement and the right partner in India," he said. "We are enthused about India. We are enthused about Vietnam."

Schultz also said the company will launch an iced version of its Via brand instant coffee in North America.

Starbucks will introduce Via in Japan on Wednesday following launches in the United Kingdom last month and the United States and Canada last year, taking aim at established instant coffee leaders Nestle SA and Kraft Foods Inc.

"There hasn't been much innovation in 50 years with soluble coffee," Schultz said on a visit to Tokyo to promote the product, which will be sold at its nearly 900 stores in the country. "We think we are sitting on a multi-billion dollar opportunity."

The product helped the company post the first quarterly gain in U.S. same-store sales in two years during the October-December fiscal first quarter..

The iced version will be introduced in late June in the United States and Canada, a spokeswoman later confirmed.

Instant coffee is far more popular in Japan than in the United States. Japanese bought $2.3 billion worth of instant coffee in 2009, making its market more than 3 times the size of the U.S., according to Euromonitor.

Schultz said that it will in the future look to distribute the product through grocery stores and other retail channels in Japan, similar to its strategy for the United States.

"A product like this over time has to go beyond our stores," he said, adding that it was "time to start growing the company again" in Japan, where it has slowed the pace of store expansion in the past few years.

Schultz said overall its business outlook was solid.

"We'll release our Q2 profits next week and the momentum in Starbucks' business is pretty good," he said.

Source: http://www.flex-news-food.com/console/PageViewer.aspx?page=29487&str=coffee