Starbucks (SBUX 1.00%) has not had much success when it comes to acquiring brands and growing them as stand-alone retail operations.
The company has closed all of its Evolution Fresh juice bars, has shuttered its Boulange Bakery brand, and has plans to close its Teavana tea stand-alone stores. The Evolution Fresh and Teavana branding remain alive on packaged goods and in Starbucks stores, while the Boulange brand has disappeared completely.
It's fair to say that the company failed to realize the plans it had for all three brands when it acquired them. At one point, each of the three companies was slated to be a national, stand-alone retail brand. That, of course, did not work, but now Starbucks has a new plan for a second bakery brand that might finally get it right.
A new bakery brand will open in all of Starbucks' planned Roastery locations. Image source: Starbucks.
What is Starbucks doing?
Instead of buying its new bakery brand, Starbucks has instead decided to license and invest in Princi, a "boutique bakery, and café founded by Rocco Princi in 1986," according to a press release. The coffee chain won't own the brand.
Instead, it will work with other investors, which include Angel Lab and Pekepan Investments, along with Princi's founder to focus on growing the bakery's number of stand-alone restaurants. Princi will also be the exclusive food partner at the coffee company's Roastery and stand-alone Reserve locations.
This deal has been public for over a year, but Starbucks had not made any public moves with Princi. That will change this week when the bakery chain launches its first store inside a Starbucks at the company's Seattle Roastery the week of November 6.
"We have great plans for the high-end, artisanal bakery, Princi," said CEO Kevin Johnson during the chain's Q4 earnings call. "Princi will be added in every Starbucks Reserve Roastery, including our extraordinary, 30,000 square-foot Shanghai Roastery opening next month, further elevating the culinary experience we offer customers."
In addition, Starbucks plans to support the launch of "a number of stand-alone Princi stores" in the years ahead, the CEO added. Those locations won't carry Starbucks branding but will serve the company's Reserve coffees.
Why will this time be different?
Teavana, Boulange Bakery, and Evolution Fresh were not failures or even unprofitable, but none of the three could deliver a return on investment that made pursuing the concept logical for Starbucks. As a publicly traded company the coffee chain must appease investors and, even though it has the means to continue growing these brands, sometimes its money is better spent elsewhere.
As a part owner of Princi, Starbucks does not face the same pressures. It can help the bakery company grow and profit from that, but it does not bear the ultimate responsibility for its success. In addition, by essentially outsourcing its higher-end food operations to a company with experience in that space, Starbucks can benefit from Princi instead of having to create on its own.
That's something which Chairman Howard Schultz explained in a press release when the deal was first announced.
"Rocco and his team at Princi possess a passion for handcrafted food and artisanal baked goods that mirrors how I feel about our coffee," he said. " The attention to detail, the care invested in selecting the ingredients and the artistry of preparation is second only to the service Rocco offers customers inside his Princi stores."
By investing in Princi, the company gets to have its cake and eat it too. It can benefit if the brand grows and becomes a large chain, but it also gets what it needs in the near-term when it comes to being able to offer an upscale bakery experience to support its Reserve and Roastery brands.
