Starbucks back on expansion path in Americas, China

Reuters, NEW YORK

Fri, Dec 07, 2012 - Page 15

Starbucks Corp plans to increase the number of its cafes in the Americas by more than 20 percent by opening more than 3,000 new shops there in the next five years as it looks to rely on tea and juice as much as coffee, it said on Wednesday.

The world’s largest coffee chain is also finished with acquisitions for now, after buying juice seller Evolution Fresh for US$30 million and Bay Bread LLC’s La Boulange Bakery for US$100 million over the last 13 months.

Starbucks also plans to close its US$620 million purchase of tea store chain Teavana Holdings Inc by year-end.

The company also announced expansion plans for the China/Asia Pacific region for the next three years.

“We’re pretty full up at this time in terms of our resources and capabilities,” chief executive officer Howard Schultz said at Starbucks’ investor conference in New York on Wednesday. “At this moment in time, we have enough to handle.”

Food has long been a weak link at Starbucks, which plans to roll out sweet and savory La Boulange pastries and other products at 2,500 of its company-operated US shops by the end of next year. Starbucks also expects to have Evolution Fresh juices in more than 5,000 US stores by then.

Evolution Fresh should be slightly accretive in fiscal 2013 and La Boulange will follow in fiscal 2014, Starbucks’ chief financial officer Troy Alstead said.

The company is also experimenting with new retail concepts.

It has opened four Evolution Fresh juice stores and one Tazo tea shop in the US, and it plans to add “tea bars” to existing Teavana stores.

The goal at Teavana is to replicate the success the company had adding coffee drinks at its early Starbucks stores, which sold whole bean coffee.

Starbucks’ consumer packaged goods business, which sells such items as whole bean coffee and bottled drinks through grocery stores and other retailers, could one day be as large as the cafe chain, Schultz said.

When Starbucks’ fiscal year ended on Sept. 30, the company had 18,066 shops around the world, with just over 12,900 in the Americas.

The US dominates that region and will get more than half of the 3,000 planned new stores that the company announced on Wednesday.

Starbucks expects China to overtake Canada as its second-largest market in 2014. The fast-growing China/Asia Pacific region will have nearly 4,000 cafes by the end of next year, including 1,000 in China, where Starbucks said it was on track to have 1,500 cafes in 70 cities in 2015.

John Culver, president of Starbucks’ China/Asia Pacific business, said sales at established stores in the region remained robust in October and last month, following a 10 percent increase in the fiscal fourth quarter that ended Sept. 30.

“We have seen the momentum we had in the fourth quarter carry over,” Culver said.