How Starbucks Will Revive European Operations

Howard Schultz's return to the helm of Starbucks (Nasdaq: SBUX  ) in 2008 managed to reverse the coffee chain's dwindling American business. Now he's shifted his attention to the European market, where the company hopes to revive the business, as well as grow it. The overhaul in Europe will be led by Michelle Gass, the newly appointed president of the European, Middle Eastern, and African region.  

Doubling it up
One of the first parts of the world's largest coffee purveyor's agenda will be to boost the caffeine in the coffee it serves in the United Kingdom. According to research, there has been a 60% rise in the number of customers asking for extra shots of caffeine in their lattes. Also, many have complained that Starbucks' caffeine level is meek compared to rival Costa. In fact, studies have revealed that Costa's coffee contains triple the amount of caffeine in a Starbucks brew.

In the future, Starbucks will offer two shots of espresso instead of one in its lattes, cappuccinos, and other drinks to meet the demands of its British customers. However, those who prefer the older recipe can still get it. The company is currently training 10,000 British baristas to ensure that portions are correct and the milk is more "velvety."

Starbucks has 743 cafes in Britain. It plans to take this number to 1,000 in the next three to five years. According to The Sunday Telegraph, the company plans to spend $12.67 million (8 million pounds) to revamp its London stores and give them a local feel to appeal to the British audience. That's not all. Starbucks lattes will also be offered on aircrafts and trains, and there will be coffee vending machines across the U.K.

According to Gass, the expansion plan in Europe, as well as the Middle East and Africa, is expected to be "significantly greater" in the next few years.

Admitting ignorance
The plans for an overhaul stem from the fact that revenue from the region only accounted for one-tenth of its total revenue last quarter. Management was too busy repairing its U.S. operations and may have overlooked the region. In fact, Schultz admitted, "From 2008-2010 my primary focus, and that of the leadership, was to strengthen and fix the US business. We unfortunately were not able at the same time to focus on this region."

Well, no surprises why such a move is in place. However, the strategy is somewhat reminiscent of its robust expansions plans back in 2008 that led to its downfall and the return of Schultz.

We can only hope that Starbucks will not repeat its mistake, though it appears to be on the right track. For starters, the company's original hangups were due to overexpansion, while this move seems very carefully focused on quality. Also, the company is trying to cater to region-specific needs. While the chain looks to offer a "light" espresso in France, in Greece it will offer a low-cost cappuccino. Starbucks is focusing on brand building in the continent and intends to spend some real money to make the brand bigger in Europe.

In the meantime, we might choose to wait on the sidelines and watch. If you want to follow the developments closely, stay up to date on the latest on Starbucks by adding the stock to your watchlist. Try it. It's free! You can add it to your list by using the link below.   

Fool contributor Shubh Datta doesn't own shares in any of the companies mentioned above. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks. Motley Fool newsletter services have recommended writing covered calls on Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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