Starbucks outlines unit, product growth

Staff Writer
Starbucks outlines unit, product growth

Starbucks Corp. is continuing to pursue expansion plans both within and outside its units, despite outside economic pressures threatening the company’s bottom line.

The headwinds of higher commodity costs, primarily for coffee, will take a projected $230 million toll on Starbucks in 2012. But momentum from its expanded grocery store products and international growth will continue to drive results, company officials said following a report on first-quarter earnings, which showed a 10-percent increase in profit and record revenue.

Starbucks chairman and chief executive Howard Schultz said the coffeehouse chain is serving more customers than ever before at its 17,244 worldwide locations, despite a “seismic change” in consumer behavior from the “cataclysmic” recession.

Starbucks, he said, is well positioned to take advantage of those changes, which include continued economic pressures on consumers, and increased use of digital and social media and mobile payment.

For example, one in four customers pay with Starbucks loyalty cards, which offer discounts that appeal to budget-minded guests, he said.

Starbucks also has 40 million fans on Facebook and is a leader in Twitter and Foursquare, allowing the company to lower traditional advertising costs and “build a more enduring emotional relationship with our customers,” Schultz said.

Given the macro issues many companies face, “We have been able to turn into a competitive advantage with regard to value, social digital media and mobile payment,” he said.

Starbucks’ U.S. company-owned units posted a same-store sales increase of 9 percent in the first quarter, including a 7-percent increase in traffic. It was the strongest holiday season in the company’s 40-year history.

Company officials credited improved unit-level productivity, as well as daypart-stretching success with the chain’s Bistro Box meals, Frappuccino Happy Hour deals and Treat Receipts, offering discounts on a second drink later in the day.

Starbucks outlined other projections for 2012:

The Americas: Using a new format to report results, the Americas region now includes 12,494 U.S. locations — which account for about 90 percent of results — along with Canada and Latin America.

Clifford Burrows, president of The Americas division, said holiday offerings, such as peppermint mocha, gingerbread latte and caramel brulée latte drinks, boosted sales by about 20 percent over the previous year.

Average daily transactions per location surpassed a previous record set in 2006, and 413,000 people joined the chain’s My Starbucks Rewards program in December alone, bringing total membership to 3.7 million.