Starbucks to Sell Alcohol in Stores

The coffee chain is going to add beer and wine sales to thousands of stores across the United States.

Mar 22, 2014 at 7:41AM

Starbucks (NASDAQ:SBUX) wants to perk you up in the morning and get you drunk later in the day.

While the company did not explain it quite that way, Starbucks does plan to greatly expand the number of stores selling wine and beer in the United States. 

Starbucks experiments with booze

Starbucks started selling alcohol in Seattle stores in 2010 and expanded testing to 25 locations in Los Angeles, Chicago, and Atlanta in 2012, according to . Now the company sells alcohol in around 40 of its 11,500 U.S. stores. Those sales have apparently been going well. Starbucks COO Troy Alstead told Bloomberg Businessweek that there are plans to bring beer and wine sales to thousands of U.S. stores.  

"We've tested it long enough in enough markets -- this is a program that works," he told Businessweek. "As we bring the evening program to stores, there's a meaningful increase in sales during that time of the day."

The roll-out, Alstead said, will take several years and isn't expected to hit every store in the country. The company plans to focus on urban and other growth areas first.

Starbucks needs help at night

Like its competitor Dunkin Donuts (NASDAQ:DNKN), Starbucks is always searching for ways to get its morning customers to come back in the afternoon. One of its regular tactics has been the "treat receipt." This program lets customers who buy a beverage in the morning buy another in the afternoon at a significant discount.

This year the company also rolled out a "sweet receipt" promotion that offers morning customers a pastry for $1 after 2 p.m. as long as they bring in their morning receipt.

Pastry is an important part of Starbucks efforts to get customers into its stores at times other than the morning. 

When the chain shelled out $100 million for bakery La Boulange  in 2012, CEO Howard Schultz explained to investors that "what La Boulange is providing us well beyond the morning pastries and the lunch is a significant platform to go after need states and day parts well into the future," Quartz reported.

In 2010 when Starbucks first began selling alcohol at a Seattle location, USA Today reported that the company's coffee shops made more than 70% of their sales before 2 p.m. Even if those numbers have improved with the treat receipt program and the expanded pastry offering, the chain likely has huge capacity to grow its late afternoon and evening sales.

How big a market is evening for Starbucks?

Beer and wine -- which will likely be sold after 4 p.m. -- could certainly give customers a reason to stop by later in the day. The alcohol offerings will also be paired with food -- think flatbreads, chocolate fondue, and other shareable items that should not only bring customers in, but should increase the size of their check.

At Wednesday's annual shareholders meeting, Schultz noted that the typical Starbucks customer spends about $5 per visit, USA Today reported. "A glass of beer or wine can instantly double that figure."

Starbucks has huge growth goals

For Starbucks to achieve the growth goals Schultz spoke about on Wednesday, it's going to need to continue to innovate and be aggressive.

"We're still in the early stages of the growth and development of Starbucks, we're delivering record profits and revenue, sharing our success with our partners and heading toward a $100 billion market cap," Schultz told the crowd.

Alcohol sales -- if handled correctly -- should bring a massive increase in revenue to Starbucks stores located in the right places. The company must be careful however as alcohol -- even just beer and wine -- brings problems that coffee does not. It's rare, for example, for fights to break out in coffeehouses or for a coffee server to need to cut off a customer to prevent over-service. 

It's also important that no matter how tempting the added revenue is, Starbucks must fiercely protect its image and the brand's relationship with its customers.

That likely will not be a problem. Schultz has been so fiercely protective of the Starbucks brand that he changed how the company makes its breakfast sandwiches because the original way left the stores smelling of bacon, not coffee.

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Daniel Kline has no position in any stocks mentioned. He drinks a lot of coffee from Starbucks. The Motley Fool recommends Starbucks. The Motley Fool owns shares of 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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