Summer vacation is over and college students are getting back to campus, ready to take on school-year staples including early classes and all-nighters. Caffeine is clearly called for and coffee companies are trying to oblige.
Even with many coffee shops placed strategically near campuses, companies like Starbucks (NASDAQ:SBUX) and Dunkin' Brands Group (NASDAQ:DNKN) have made it a point to try and develop more properties inside of campuses, such as in academic commons and dorm lobbies. Now, Starbucks is taking that a step further with coffee trucks that can be parked right outside of students' classes. The company is sending a truck to three college campuses this fall.
Why coffee chains want college students
Coffee is a popular commodity among college students. For Aramark, one of only three food service companies that operate the majority of college-campus-provided food, coffee products represent about 18% of its sales on college campuses. Within the fast-food industry overall, coffee represents closer to 9% of total sales. (The Starbucks trucks are licensed stores operated through Aramark.)
With nearly 12,000 Starbucks locations in the U.S., Starbucks can be found nearly everywhere you want to be. That includes many college campuses. However, there are currently only about 300 Starbucks locations actually on college campus, which relates to less than 7% of the total number of college campuses in the U.S.
Both Starbucks and Dunkin' Donuts have made it a priority to increase their store numbers on college campuses. Dunkin' Donuts encourages more franchises on college campuses, saying that the company offers both full retail shops and kiosks that "are perfect for campus centers, student unions, dining commons." However, Starbucks wants to get in front of the college students on their way to class to drive up coffee sales, literally.
Starbucks to "drive up" college campus sales
Starbucks' mobile coffee shop is being tried at three college campuses this fall: Arizona State University, James Madison University in Virginia, and Coastal Carolina University in South Carolina.
Why is this a good idea? As stated above, Starbucks has a presence on only about 7% of college campuses in the U.S. If the trial of this concept works at these three locations, it could be very easy for Starbucks to implement this idea around the U.S. and to gain a much larger campus presence with much smaller investment than actually building its classic stores.
Another reason is that these trucks can be driven around campus during the day, parking near a dorm in the morning, and near classrooms in the afternoon, effectively giving students the convenience of buying great coffee anywhere they are.
Starbucks wants smart baristas as well
Another way that Starbucks is getting in front of the college student demographic is by helping to ensure that more of its own baristas are among this group. Earlier this year, Starbucks announced the Starbucks College Achievement Plan, which aims to provide up to full tuition repayment for any benefits-eligible employee in the U.S.
While the program is currently only available for online degrees provided through Arizona State University, it's a great start for the company to ensure its employees are part of this demographic they are fighting so hard to get in front of. Not only does this provide reason for more people to want to work for Starbucks, but it helps the company to build its future business leaders.
The program announcement noted that nearly half of Americans who begin college today will not actually finish, partially due to high costs, and that the company would like to change this for the sake of their employees. Nearly 4,000 Starbucks employees had reportedly applied to begin an online program ahead of the Oct. 15 program start date.
The final buzz: Starbucks is winning students and investors alike
This is only one example of why Starbucks continues to be the industry leader. Through smart growth, great customer engagement, but most importantly through building an incredibly strong brand that resonates with key demographics, such as college students, Starbucks has proven again and again why it deserves its spot at the top of the industry. While the stock isn't exactly cheap right now at a P/E of above 30 times earnings (though that's about the same price as Dunkin' Brands Group stock as well), Starbucks is still a great company to consider for your long-term portfolio as a strong company that maintains strength and continued growth year after year.
Bradley Seth McNew has no position in any stocks mentioned. 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.