This isn't your typical Starbucks (NASDAQ:SBUX) anymore. The coffee shop is radically reinventing itself in a bid to grow and engage customers globally, and the changes will redefine how we think about and interact with it.
First, there aren't enough Starbucks stores in operation. Despite you thinking there's one on every corner, Starbucks believes it can still shoehorn in a bunch more. It's found that not only do more stores increase revenues (of course), but their density compounds the multiplier effect. There are eight times more Starbucks in Seattle per capita than there are in Buffalo, but Seattle generates 10 times more sales per capita. In short, the more stores it opens the more people visit -- and revenue growth can accelerate.
While coffee will always be the main focus of Starbucks, the real change will come from the rising number of opportunities -- and reasons -- consumers have to visit.
This is where the reinvention part comes into play. Starbucks unveiled a five-year growth plan at its biennial investor day conference last week amounting to a six-part call-to-action over five years:
- New and varied food offerings, including alcohol
- New store formats
- Food and beverage delivery
- Mobile platform enhancements
- Expansion of its Teavana tea business
- Global growth
Ultimately, Starbucks is reimagining its food offerings to address what kind, how we order it, and how we get it.
A seat at the table
The coffee shop expects to double U.S. food revenues to over $4 billion during the next five years and anticipates as many as 25% of all U.S.-based stores will offer the Starbucks Evenings experience by the end of 2019.
Across all dayparts -- a fancy way of saying breakfast, lunch, and dinner -- Starbucks will be introducing new menu offerings, with perhaps the biggest change being the arrival of alcohol in more Starbucks restaurants. Over the next five years, it will have beer and wine available in up to 25% of its 11,900 stores. It expects the new food items, along with the alcohol, to generate about $1 billion in new sales.
It will deliver this customer experience through new store formats, too, including Starbucks Reserve Roastery & Tasting Rooms, micro stores, and express, not to mention drive-thrus and roach-coaches -- er, mobile trucks that will start appearing next year.
And let's not forget about delivery.
Delivering the goods
In select metropolitan areas Starbucks will begin food and beverage delivery to enhance its ties to customers, extend their loyalty, and meld the process with its mobile apps for ordering and payment, or what CEO Howard Schultz called "e-commerce on steroids." It might not be a completely seamless rollout, but it could develop further opportunities for engagement with customers.
And its massive mobile app touchpoint will revolutionize how we interact with Starbucks via Mobile Order & Pay, which will allow customers to place an order, pay for it online, and pick it up at their preferred Starbucks. That feature could free up employee time behind the counter to more quickly prepare customer orders.
Starbucks' loyalty program already has 8 million members and generates 7 million weekly mobile payment transactions, but this number will likely balloon as it rolls out the ordering and payment app nationally next year.
A place unto itself
The coffee shop is, well, already much more just a coffee shop. Add more and better food, adult beverages, and an inviting customer experience, and Starbucks has reimagined its stores and the way its customers can unwind.
And this is just what's in store for the U.S. market. There's a whole separate roadmap for what Starbucks will become internationally.
That translates into higher sales
For investors, expect sales to grow. Where grocery store sales have grown at a meager 2% pace over the past three years and coffee sales are rising at a 9% clip, Starbucks revenues have rocketed higher at a 23% compounded annual rate.
Starbucks sales continue to grow exponentially, all the while increasing the density of its stores. As it fills in the bare spots, that rate could widen further.
We may just see the fulfillment of that snarky prediction by The Onion that a Starbucks will soon open inside the bathroom of a Starbucks. But we won't raise our eyebrows when it happens.