Starbucks focuses on food
According to Starbucks’ chief financial officer, Scott Maw, food is going to be bigger business for the group going forward. The coffee house king, which is still looking at growing its share of the coffee market, is testing new ways to attract customers in for meals, particularly those at lunch time. Starbucks has had some great successes with food orders so far – most notably at breakfast time – but Maw says that lunch is going to be a bigger focus for the group in the near term.
He told CNBC that the company’s food offerings were “all about providing higher-quality, fresh food at lunch”, and said that Starbucks had been testing its “Mercado” food program in Chicago. This new program revitalizes the way Starbucks prepares its food –gone are the pre-prepared, pre-packaged, selections that we’re used to. Instead, all the food is prepared in-house by Starbucks employees, and sold same-day.
Mercado has been a success, and Maw says that the company is now looking to roll the program out over other cities in the U.S. Worldwide, Starbucks has over 26,000 locations, and there’s every chance that a heightened lunch option could make its way to most or all of them eventually.
While margins for food are leaner than those for coffee, Maw says that the nature of the product makes up some of the difference. Because food, unlike coffee, is usually an ‘eat-in’ proposition, sales of food actually boost “the operating margin at the store level.”
Maw says that the company is “focused on two things”. The first is increased interaction on the company’s wildly successful digital platforms, enabling them to pre-purchase food and drinks. The second is an understanding of what brick-and-mortar can offer the world of retail in an increasingly digital age:
“If you want to be a successful physical retailer, you have to deliver an experience… a third place environment.,” he said.
Dominion holds Starbucks in its Global Trends Managed Fund.
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