Starbucks to Offer Coffee Delivery Across U.S. -- 2nd Update
December 13 2018 - 5:41PM
Dow Jones News
By Julie Jargon
Starbucks Corp. plans to expand coffee delivery across the U.S.
with UberEats as part of a broader strategy to try to reach more
customers.
The coffee chain, which has been facing slowing traffic to its
domestic coffee shops, on Thursday outlined its growth plans for
investors gathered in New York.
Starbucks began testing delivery in Miami with UberEats in
September and will begin offering it in nearly a quarter of its
more than 8,000 U.S. company-operated stores early next year.
Delivery is becoming a source of added sales for many restaurant
chains that have seen their dining room traffic erode. Many chains
say delivery has attracted customers who don't come in to eat.
There are unique challenges involved in delivery, including
getting food to customers' homes quickly and while still hot --
something that could be particularly problematic for coffee.
Delivery fees also can be a turnoff for customers placing small
orders.
Starbucks is farther ahead on delivery in China, where the
service has been expanded to more than 2,000 stores in 30 cities
since the chain joined with a delivery unit of Alibaba Group
Holding Ltd. The company says it has solved some of the challenges
delivery poses in China with splash-proof lids, delivery containers
designed to keep drinks hot or cold and tamper-proof packaging
seals. Dedicated drivers in China promise to deliver Starbucks
coffee in 30 minutes or less. The chain also is creating a virtual
store that allows customers to use only one app to order gifts or
products for themselves and have them delivered.
Starbucks has been working for more than a year to streamline
its operations so it can focus on boosting customer traffic in the
U.S. and China, its two key markets. Starbucks has closed its
Teavana mall stores, redeployed baristas' duties, including having
them clean after shops close, to allow them to focus more on
customer service, and joined with Nestlé SA to market and sell much
of its packaged coffee in supermarkets. Starbucks-branded products
have been developed for use in Nestlé's Nespresso and Dolce Gusto
single-serve coffee machines.
The company last month said it would lay off approximately 5% of
its global corporate workforce as it seeks to become more nimble
and focused.
"We're simplifying the business to accelerate the velocity of
innovation, " Starbucks Chief Executive Kevin Johnson said in an
interview Thursday.
The company is trying to develop more cold drinks, which now
make up 50% of its beverage sales. The chain plans to have nitro
cold brew on tap in all of its U.S. company-operated stores by the
end of fiscal 2019.
Mr. Johnson pointed to the company's fiscal fourth quarter, when
the company posted progress in every operating metric it tracks
globally, as proof that its moves are beginning to pay off.
However, sales growth in the U.S. beat expectations due to an
increase in average ticket. Getting more customers in its doors
remains a challenge, the company has said. The coffee market has
become increasingly crowded in recent years, with new entrants on
the high end and lower-cost rivals such as Dunkin' Brands Group
Inc. offering improved espresso-based drinks.
Starbucks adjusted its outlook for long-term annual per-share
earnings growth to at least 10%. In November 2017, it had reset its
long-term annual EPS growth target to 12% or greater, down from a
previous forecast of 15% to 20%. The company said it expects
long-term consolidated revenue growth of 7% to 9%, in line with its
previous target. Starbucks plans to grow same-store sales by 3% to
4% globally each year.
Activist investor William Ackman in October disclosed at 1.1%
stake in Starbucks and has said he agrees with the changes
Starbucks is making. Mr. Johnson declined to comment on the nature
of any meetings he's had with Mr. Ackman.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
December 13, 2018 17:26 ET (22:26 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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