Starbucks growth strategy: new places, products

By Sarah Skidmore

Associated Press

Published: Wednesday, March 23 2011 3:06 p.m. MDT

** CORRECTS SPELLING IN MISSED SECOND T IN SEATTLE AND PHOTOGRAPHER JOHN NOT JON IN BYLINE** Starbucks CEO Howard Schultz, begins the 2011 shareholders meeting at McCaw Hall on Wednesday, March 23, 2011, in Seattle, Wash.

The Seattle Times, John Lok) SEATTLE OUT, USA TODAY OUT, MAGAZINES OUT, TV OUT, NO SALES. MANDATORY CREDIT, Associated Press

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SEATTLE — Starbucks Corp. is expanding the products and places it sells to customers and adding extras — like free online access to Marvel Comics in its cafes and single-serve coffee machines in other stores.

The company has been working for some time to move its business beyond its cafes, which took a hit during the recession but have since rebounded. On Wednesday, executives laid out how the company is putting its new strategy into practice.

"We are now playing from a position of strength," Chief Financial Officer Troy Alstead told the capacity crowd at the company's annual meeting in Seattle.

CEO Howard Schultz said one of Starbucks' critical steps is expanding its consumer packaged-goods business, which he said could one day rival its retail business in revenue. A key component of that will be increasing single-serve coffee sales in the U.S., an estimated $1.6 billion market. Starbucks says two-thirds of the growth in the U.S. coffee market during the past year has come from the single-serve market.

Starbucks entered the market with its Via Ready Brew instant coffee in 2009 and expanded its presence in February when it announced a deal with Courtesy Products to provide its coffee in premium hotel rooms. Starbucks then announced this month that it will provide coffee and Tazo tea for Green Mountain Coffee's Keurig single-cup machines.

Starbucks plans to sell the Keurig system in specialty retailers in the fall and in its own stores in 2012. The company said Wednesday that it believes it can ultimately build the K-Cup deal into a business worth more than $1 billion. Starbucks said it also plans to sell an on-demand single-cup brewing system through its partnership with Courtesy Products through specialty retailers starting in the fall.

The company announced a 10-year extension of its partnership with Autogrill's HMSHost to operate Starbucks cafes in U.S. airports and other travel sites.

Company leaders said Starbucks remains dedicated to coffee and its own stores. And they highlighted a number of ways the company hopes to connect with consumers in its cafes, including a system for paying for drinks by phone and its increasingly popular social networking tools to increase traffic.

The company also announced plans to enhance the free Wi-Fi network it provides in nearly 7,000 company-operated cafes, adding access to subscription and Web services including The Economist, ESPN Insider Rumor Center, Marvel Digital Comics and Mediabistro. Customers log in using their own computers, tablets or smartphones. Providing the service is intended to increase sales of Starbucks' drinks and other products.

Shares of Starbucks, which got a boost from a dip in coffee bean commodity prices, rose $1.74 — almost 5 percent — to close Wednesday at $36.69.

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