This morning ritual may sound familiar these days. Needing to take a break while you work from home, you drive to a Starbucks (SBUX -0.17%) to quickly grab a pumpkin spice latte, one of the coffee chain's most popular drinks. The company is almost ubiquitous around the globe with more than 18,000 stores in the U.S. and 14,000 in the rest of the world. Its growth has been remarkable: Starbucks had 16,858 stores at the end of fiscal 2010, but it wrapped fiscal 2020 with almost double that number, good for a compound annual growth rate of close to 7%.

The company is far from finished, though. During its biennial Investor Day on Dec. 9, CEO Kevin Johnson outlined the company's ambitious growth plans for the next decade, while CFO Patrick Grismer reaffirmed the company's guidance for fiscal 2021 and growth rates for 2023 and 2024. Starbucks, which will be celebrating its 50th anniversary next year, still believes it has a long runway of growth and the resources to make it happen.

Lady barista serving up a cup of coffee and a pack of take-out food

Image source: Getty Images.

Growth at scale

Starbucks' Investor Day focused mainly on its Growth at Scale initiative. Not only does the company plan to grow both its store count and earnings over time, but it also plans to do so in a responsible way while making a positive impact on people and the planet. Starbucks wants to increase its retail penetration by expanding its store base to 55,000 by fiscal 2030. This expansion is expected to be accompanied by comparable-store sales growth of 4% to 5% annually, starting in fiscal 2023. Most of the new stores will be in China, Starbucks' second-largest growth market.

Euromonitor, an independent research company, expects the addressable market for coffee to grow at a rate of 5% to 6% per year, hitting $450 billion of revenue globally by 2023. This anticipated rise in coffee consumption is a tailwind for Starbucks and will provide it with opportunities to increase its market share.

Reconfiguring stores

Customer behaviors have changed due to the effects of COVID-19. The company shared five key insights into how customer habits have shifted, and they include: a need to be seen and feel connected with others; a desire for experiences that conform to their lifestyles; appreciation for consistent experiences; concern about using planet-friendly and sustainable products; and increased loyalty to brands that exhibit strong values.

Because of these observations, Starbucks plans to reconfigure its existing and new stores to meet the changing needs of its customer base. New store formats such as drive-thru and curbside pickup will increase convenience and reduce physical touchpoints for customers who are worried about exposure to the coronavirus, while around 60 more Starbucks Now stores will be opened in China in the current fiscal year.

Deepening customer connections

It's also noteworthy that Starbucks has managed to increase the 90-day active U.S. member count for its Starbucks Rewards loyalty program to 19.3 million as of the end of fiscal 2020, up 10% over the prior year. In a time when the business was forced to temporarily close stores due to the pandemic, this statistic itself is impressive.

These members drive nearly half of Starbucks' total revenue, so it's essential the segment continues to grow. And the Starbucks Rewards program was just recently revamped and now features a "Stars for Everyone" concept that allows members to accumulate rewards even faster.  

Starbucks plans to tap its artificial intelligence (AI) initiative, known as Deep Brew, to offer a more personalized experience for its customers. The company is investing more to build digital relationships to ensure the business stays relevant and resilient even through challenging times like the pandemic. In the future, Starbucks plans to tailor experiences to customers according to their beverage preferences and where they live, supported by data mined from its AI.

A culture of innovative expansion

The recently concluded Investor Day offers a peek into what management is planning and also lays out the company's ambitious but achievable plan to deepen customer relationships, grow its store footprint, and drive stronger loyalty. Although Starbucks has already grown by leaps and bounds over the years, management remains confident in the future and has outlined the strategies required to reach its internal targets.

The stock offers a great avenue for investors who are looking to grow their money steadily over time. Management also recently increased the quarterly dividend to $0.45 per share, the 10th consecutive year of payout increases. Starbucks is positioned to serve up a good mix of both growth and income to shareholders.