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Starbucks: Grocery Marketer

04/05/2012

Starbucks Corp.’s grocery revenues are growing nearly three times as fast as café sales, and CEO Howard Schultz is working to transform the coffeehouse chain into a major supermarket supplier, reports Bloomberg News.

“We’re in the nascent stage of what we believe is our capability to do a number of things within food and beverage,” Schultz told the news organization. Jeff Hansberry, president of channel development, added, “We think we can build a business that can be as a large as our retail business.” The consumer-goods segment will continue to expand both organically and through acquisitions, he said.

It’s a really insightful story; read it at: www.bloomberg.com/news/2012-03-22/schultz-transforming-starbucks-into-supermarket-supplier-retail.html.

At the moment, 91 percent of revenue comes from Starbucks cafes. But in its fiscal 2011, income for Starbucks’ global packaged-goods business was 32 percent of revenue, compared with 19 percent for the U.S. business.

Starbucks has been moving into grocery stores since 1995, when it began selling ice cream in such flavors as java chip frappuccino and caramel macchiato. It added packaged coffee, bottled drinks and Tazo brand tea.

Last year, Starbucks contracted with Green Mountain Coffee Roasters to sell K-cups for Green Mountain’s Keurig single-serve coffee makers. It then paid $30 million for juicemaker Evolution Fresh Inc. and has plans to sell the flash- pasteurized juice in grocery stores.

In 2009, the company introduced Via, a pricey single-serve instant coffee. Despite skepticism at the time, it’s done well and Bloomberg called it “a driver of overseas growth, especially in Asia where instant coffee is widely drunk. Schultz has said Via eventually will become a billion-dollar brand.”

In what Bloomberg called Schultz’s boldest move yet to become a player in groceries, he last year wrested control of packaged coffee distribution from Kraft. The food marketer sued Starbucks for breach of contract. The dispute has gone to arbitration and probably will be resolved this year.

Later this year, Starbucks will start selling 60-calorie energy drinks in U.S. stores. Called Refreshers, they are made with fruit juice and green-coffee extract.