Starbucks Back on Expansion Path in Americas, China

Wednesday, 05 Dec 2012 11:10 AM

 

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Starbucks Corp. plans to open more than 3,000 new shops in the Americas in the next five years, an increase of more than 20 percent, as it pushes a growth strategy that relies on tea and juice as much as coffee, the world's largest coffee chain said on Wednesday.

The company is done with acquisitions for the time being, after a spate of deals that added juice seller Evolution Fresh and Bay Bread LLC's La Boulange Bakery for $30 million and $100 million, respectively. The company has also agreed to buy tea store chain Teavana Holdings Inc. for $620 million.

"We're pretty full up at this time in terms of our resources and capabilities," Chief Executive Howard Schultz said at Starbucks' investor conference in New York on Wednesday. "At this moment in time we have enough to handle."

Food long has been a weak link at Starbucks, which plans to roll out La Boulange pastries and other goodies to 2,500 of its company-operated U.S. shops by the end of next year. Starbucks also expects to have Evolution fresh juices in more than 5,000 U.S. stores by the end of 2013.

Starbucks previously said it would add "tea bars" to existing Teavana stores. The goal is to replicate the success it had adding coffee drinks to the menu at its early Starbucks stores, which sold whole bean coffee.

"There is always a risk when you take on all these brands," said Bernstein Research analyst Sara Senatore, adding that Starbucks mitigated that risk by making deals that fit with its long-term growth plans, which focus on increasing its reach beyond coffee and the four walls of its cafes.

Schultz admitted that Starbucks' growth in 2007 and 2008 — the years before its business plunged with the housing crisis — was "undisciplined" and said the company is not returning to that prior strategy of "growth for growth's sake."

Analysts also are looking for an update on sales of Starbucks' new at-home Verismo coffee and espresso brewer, which aims to grab a piece of the fast-growing single-serve market dominated by Green Mountain Coffee Roasters Inc. and Nestle SA.

Starbucks shares were up 28 cents to $51.40 in early Nasdaq trading.

© 2014 Thomson/Reuters. All rights reserved.

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