Starbucks' Brilliant Sandwich Move

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Would you like a sandwich with your coffee?

Starbucks (NASDAQ: SBUX  ) just booked strong revenue growth for its fiscal second quarter. And the rise was fueled in part by one unlikely star product: panini sandwiches.

The coffee king's sales jumped higher by 7% in the U.S. Of course, popular espresso beverages -- like the vanilla spice latte and hazelnut macchiato -- did their part by selling well. But food also played a big role in delivering Starbucks' outsized sales gains.

Food and prepaid cards pair well
That's partly thanks to the company's prior success in selling massive amounts of prepaid cards. Customers loaded more than $1 billion onto their loyalty cards in the final three months of 2012, and gift cards were one of the most popular presents over the holidays. Those trends added up to billions of dollars of Starbucks money just sitting in people's pockets, ready to be spent.

And customers chose to spend more of that cash on food last quarter. The company's expanded availability of paninis was a hit, boosting food sales and drawing more traffic into the stores during those typically slower afternoon hours.

Satisfied customers
Thankfully for Starbucks, the uptick in food sales didn't seem to hurt customer satisfaction, either. Speed and friendliness metrics have fallen at McDonald's (NYSE: MCD  ) lately, and customer complaints are on the rise. It's probably no coincidence that Mickey D's has seen its sales growth tick down over the past few quarters.

But Starbucks has managed the opposite result. The company said that, despite the busier stores and expanded food options, order accuracy and staff friendliness metrics actually rose. The overall satisfaction scores at Starbucks locations improved last quarter by the highest amount in two years.

Another helping
All of that bodes well for the company's ambitious plans to broaden its food menu. Starbucks spent $100 million to buy the La Boulange bakery brand last year, and it has been testing new bakery food options in its Northern California stores.

The company is happy enough with the results that it expects to introduce the new treats to all Starbucks locations over the next 18 months. Given that customers added 32% more dollars onto their loyalty cards last quarter, they'll have plenty of money to spend on trying out the new food options when they arrive. 

Hungry for more?
With its premium beverages, McDonald's has been pushing into Starbucks' territory. But the company's stock turned in a dismal year in 2012, underperforming the broader market by 25%. Looking ahead, can the Golden Arches reclaim its throne atop the restaurant industry, or will this unsettling trend continue? Our top analyst weighs in on McDonald's future in a recent premium report on the company. Click here now to find out whether a buying opportunity has emerged for this global juggernaut.

Read/Post Comments (3) | Recommend This Article (8)

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  • Report this Comment On April 28, 2013, at 4:23 PM, arieshj wrote:

    With all that extra money Starbucks made just from selling food, perhaps they could use some of that to make sure the food is safe for consumers. I was so sick and missed work for 2 days (was not allowed to return to work in health care facility until getting the clearance from symptoms of diarrhea, nausea, vomit) after eating their artisan breakfast sandwiches w/ gouda cheese in it last yr. And this is the second time I got sick from eating/drinking from Starbucks, but the worst so far.

  • Report this Comment On April 28, 2013, at 6:37 PM, zerodeck wrote:

    Those symptoms or diarrhea, nausea and vomiting are more consistent with a gastro-intestinal virus (GI/AGE/Norwalk) than food poisoning.

    These viruses can be contracted after touching a dirty door handle and are prevalent on mass transit or any public area with a lot of human traffic.

    It could have been co-incidental that you had eaten at Starbucks that morning, so make sure before you make accusations.

  • Report this Comment On April 29, 2013, at 7:20 AM, follower250 wrote:

    I only had one of their sandwiches once and it was disgusting. Didn't make me sick, just nauseated.

    A mcmuffin would've been better than that turkey bacon muffin thing. They just toss it from frozen into the microwave for a few seconds. I'll never buy food there again.

    Coffee usually tastes burnt so I get one of the cremes.

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Related Tickers

9/27/2016 4:00 PM
SBUX $54.19 Up +0.15 +0.28%
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