Starbucks the Supermarket: A Much Better Plan Than Starbucks the Record Store
Starbucks (SBUX) is planning to use its stores as a launching pad for branded food and beverage items that it will then sell in supermarkets, a smart move that promises to be greeted with much more success than the chain's previous attempts at nurturing new lines of business.
CEO Howard Schultz says Starbucks will sell things like new Tazo tea and Seattle's Best products in its stores. After they've developed a following, they'll be offered to grocery stores. It's a bid to leverage Starbucks' powerful retail presence of 7,000 US stores, a feat that's proved vexingly hard for the chain to pull off. Some four years ago, Schultz announced with stars in his eyes that Starbucks was entering both the music and entertainment businesses. Stores would sell and promote albums cut by Starbucks very own record label, and would also feature a collection of buzz-worthy books and movies.
But the number of people who wanted to buy their next book club selection or Saturday night entertainment along with their morning latte proved disappointingly small, and the chain's attempt to become both Oprah and the Virgin Megastore fizzled. All that's left now is a few scattered CDs at the register and a lawsuit by Carly Simon who is accusing Starbucks and its record label of not sufficiently promoting her 2008 album This Kind of Love.
In retrospect, it's still not clear why anyone thought coffee and movies should go together. Coffee and food, needless to say, makes much more sense. Schultz says he was inspired to make this recent move because of the success of Via packets of instant coffee, which are sold in both Starbucks stores and supermarkets. The company says that US sales of Via, introduced last September, have exceeded $100 million.
The key will be coming up with the right kinds of products -- foods and drinks that have enough synergy with Starbucks' offerings that they don't threaten to turn the place into a makeshift 7-Eleven. Starbucks already has the tendency to sell too much stuff -- coffee cups, espresso makers and various knick knacks no one ever seems to buy.
But offering a restrained selection of chai latte energy bars and Seattle's Best espresso beans, for instance, is a good way to not only generate new revenue, but reaffirm Starbucks lead in the coffee wars (coffee being a very broadly defined term these days). Schultz knows that McDonald's (MCD), Dunkin' Donuts and Burger King (BKC) would love nothing more than to siphon off its customers.
This is a way to offer one more thing customers aren't going to get at the other places.
Image by Flckr user Senor Via
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