Analysts react to Starbucks-La Boulange deal

By
There were mixed reviews

Continued from page 1

Barish noted that Starbucks did not give specifics on anticipated pricing for La Boulange menu items in coffeehouse locations. However, he noted that La Boulange prices in the Bay area are relatively high and said he "would expect some premium to the current food program given Starbucks avowed commitment to preserving La Boulange’s freshness and quality.”

Perhaps most beneficial over the long term is the potential for consumer packaged goods, or CPG, growth for the La Boulange brand, said Barish.

“Given the company’s success with VIA and K-Cups, we think this aspect of the acquisition is especially interesting and could be highly incremental in the long term given the potential margin profile,” he wrote.

Bernstein of Barclays, however, was more cautious in response to the CPG potential for La Boulange.

“As for expansion of the existing retail platform and pursuit of the CPG opportunity, we hope Starbucks will learn to crawl before walk, with true visibility limited,” he wrote.

Others were decidedly middle-of-the-road.

David Tarantino of Baird Equity Research, for example, said, “We see strategic value related to potential to upgrade food offerings in Starbucks stores, but we think the possible benefits of this acquisition are roughly balanced with the short-term risks related to acquisition costs and increased operating complexity.”

Most said it remains to be seen whether Starbucks will take food market share from archrival McDonald’s, or bakery-café specialists like Panera Bread or Au Bon Pain.

“It’s not an immediate threat,” said Dave Jenkins, a partner in consulting firm CustomersDNA. “It will be a long road to show whether [Starbucks food offerings] will develop a following.”

Jenkins, however, said Starbucks’ move was necessary to continue growth.

“For them to grow, they either had to get people to spend more at breakfast or to move into other dayparts,” he said.

While Starbucks has long been established as a consumer favorite for coffee, food has not been the coffeehouse chain’s forte, Jenkins noted. As with all quick-service breakfast players, pricing and portability will play a key role.

“How will this be really different from the bakery products they’re selling now?” Jenkins said. “It’s almost like they’re buying a test lab.”

Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout