It's no secret that Starbucks (SBUX) is scrambling to find a strategy to keep growing. Aged 40 with over 11,000 outlets (both company-operated and licensed) stateside and nearly 6,000 international locations, the Seattle-based coffee chain is definitely mature. CEO Howard Schultz is now wisely turning to branded products to keep profits rolling.
Even though Starbucks had a stellar first quarter, sailing on rising comps both in the U.S. and abroad, Schultz knows there are other ways to boost the balance sheet. Leveraging Starbucks ubiquitous brand to peddle everything from Via instant coffee and bottled Frappuccino to logo-splashed mugs is the company's next big opportunity.
Here's why it should work like a charm.
Starbucks recently redesigned its logo to bolster the fact that it's not just about the beans anymore. The beefier image of the two-tailed siren has drawn its share of criticism. Love it or hate it, showcasing the big, green gal alone is a step in the right direction to reflect the diversification of products.
Starbucks recently took back control of its packaged coffee distribution business from long-time partner Kraft Foods (KFT). Starbucks wasn't thrilled with Kraft's performance as a distributor and was therefore legally justified to terminate their agreement. Now that the legal mess is over, Starbucks can focus on the lucrative grocery business while exploring new deals in the smaller, but steadily growing one-cup brewing market.
Starbucks knows when it has a winner on its hands. The slim little Via single shot instant packets were an instantaneous hit, generating $100 million in sales in just 10 months, a milestone VIA achieved three times faster than its widely-recognized Frappuccinos, according to my BNET colleague Carol Tice.
Following that successful introduction, Starbucks is delving into another kind of single shot. Joining Courtesy Products, a national provider of in-room coffee service to hotels, Starbucks will provide ground coffees in up to 500,000 luxury and premium hotel rooms across the U.S. It's a single-serving of a sure thing as 95 percent of Courtesy's hotel customers surveyed said they prefer the company's single-cup system over traditional in-room offerings.
Starbucks isn't being shy about its goal to shill branded products anywhere in the world food and beverages are sold. However, it's witnessed firsthand how tough it is to translate a brand to a different culture.
Back in 2003, Starbucks had to send U.S. managers overseas to rescue a floundering Japanese operation. The good news is that nearly a decade later, Starbucks has cozied up to the famously inscrutable culture and is successfully selling bottled drinks and packaged coffee to the Japanese. Expanding offerings will only be easier now.
Starbucks is officially celebrating its 40th year in business this month. Stay tuned through 2011 to see if the corporate strategy continues to get better with age.
Image via Starbucks
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