Can Starbucks Reinvent Itself?

At its peak, Starbucks (Nasdaq: SBUX  ) was opening seven coffee shops per day. This is a coffee-obsessed world, but the company's growth strategy proved over-caffeinated. At the Oppenheimer Consumer, Gaming, Lodging, and Lesiure Conference, Starbucks CFO Troy Alstead talked about Starbucks' efforts to regain its footing and re-position itself for better efficiencies and responsible growth in the future.

One of the key areas Troy Alstead focused on was distributing across multiple channels and geographies. The big figure that jumps out is that the company has managed to increase the share of consumer products, such as grocery store items, to 25% of overall operating profit. That's a significant jump from five years ago, when the company's consumer offerings only totaled 16%.

In the consumer space, Starbucks has to compete with brands like Green Mountain Coffee Roasters (Nasdaq: GMCR  ) and established home roasters. However, margins in this space are fantastic (over 35%), nearly double Starbucks' rosy long-term prediction for its brick-and-mortar stores.

Starbucks has also put an emphasis on international expansion as it looks to markets less saturated than its home U.S. market. More than one-third of the green mermaid's stores now sit outside the U.S., and that international percentage should continue to rise.

Finally, Starbucks is also looking for ways to improve its image. With companies like Dunkin' Donuts and McDonald's (NYSE: MCD  ) expanding their coffee offerings, and rival coffee shops Peet's Coffee (Nasdaq: PEET  ) and Caribou Coffee (Nasdaq: CBOU  ) providing similar experiences, Starbucks is rolling out new design concepts. In the presentation below, Troy shows off several of these designs. Amazingly, the company has actually cut costs by integrating portions of these design concepts into existing stores that are being upgraded. Also, new store investments are down 15% from their peak in 2007.

To read more about Starbucks plans to fend off competition and expand into new channels and markets, click the slideshow below:

                                                                                                                                               

Eric Bleeker owns shares of no companies listed above. Green Mountain Coffee Roasters is a Motley Fool Rule Breakers recommendation. Starbucks is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


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