From an expanded food menu to the new My Starbucks Barista voice-activated ordering option through its mobile app, Starbucks takes innovation to the next level.
Starbucks has outlined a number of changes coming to the company from a new CEO to the launch of Sous Vide Egg Bites in January 2017 and Certified Gluten-Free Breakfast Sandwich this spring to new innovations in its mobile app to make ordering even faster and easier.
The changes were announced at the biennial Investor Conference this week where Starbuck’s outlined its five-year strategic plan to grow revenue by 10%, EPS by 15-20% and drive mid-single digit comp growth each year, as it plans to open approximately 12,000 new stores globally by 2021 while continuing to elevate the Starbucks Experience around the world.
“Industry-leading innovation is driving our core business and creating further separation from competitors all around the world,” said Howard Schultz, chairman and chief executive officer. “Our Roasteries and Starbucks Reserve stores will further transform – and elevate – the Starbucks Experience we deliver to our customers, and are laying the foundation for our next wave of profitable, global growth. I have never been more energized or optimistic about the opportunities ahead as Kevin (Johnson) transitions to the CEO role and leads the most talented and experienced leadership team in Starbucks history.”
“Starbucks continues to deliver record financial performance. The customer experience created in our stores by partners who proudly wear the green apron is what makes Starbucks a destination for 80 to 90 million customers a week,” said Kevin Johnson, president and chief operating officer. “We are today executing against an ambitious, carefully-curated, multi-year strategy to further elevate the entire Starbucks brand and customer experience around the world, and further extending Starbucks leadership around all things coffee, retail and mobile. The power of our brand, the strength and momentum in our business, and the world-class management talent we have assembled give me great confidence in our ability to capture the enormous global growth opportunities ahead.”
Last week, it was announced that Johnson will assume the role of president and CEO at Starbucks, and Schultz will become executive chairman, effective April 3, 2017.
Transforming the Premium Coffee Experience
Since opening two years ago, the Starbucks Reserve Roastery in Seattle has become recognized as the most dynamic and immersive coffee forward retail experience in the world, delivering an unprecedented level of premiumization to the coffee category and fueling the next wave of transformation that is elevating the Starbucks Experience globally. Building on this, the company plans to accelerate the presentation of the Roastery experience around the world, opening its next Roastery in Shanghai in 2017, Tokyo and New York City in 2018, and a fifth location in Europe to be announced early next year.
Each Roastery will serve as the foundation for Starbucks Reserve stores – a new retail format that will integrate the theatre and romance of the Roastery with the unique culinary experience of the company’s new Italian food partner, Princi.
These Starbucks Reserve stores, under the leadership of the company’s new Siren Retail organization, represent a significant growth opportunity for the company in the U.S. and around the world.
The first of these new stores will open in Seattle and Chicago in the second half of FY17, with plans to open 1,000 or more globally over time. In addition, the company plans to open standalone Princi stores in Seattle, New York and Chicago in late 2017 and in early 2018. The company is also extending elements of the high-end Roastery experience to its core Starbucks stores, adding Starbucks Reserve experience bars in up to 20 percent of its total portfolio (including new and renovated locations) by 2021.
Premiumization Strategy
Starbucks Reserve Roasteries will serve as an innovation pipeline that will elevate the brand and contribute a “halo” to the entire Starbucks Experience. This includes new product breakthroughs that will contribute to the growth of the company’s ecosystem, segmented strategically across all Starbucks stores.
Earlier this year, Starbucks introduced its first limited-time beverage offering inspired by the Roastery, the Smoked Butterscotch Latte. This was followed by Nitro Cold Brew, which is now available in more than 500 U.S. company-owned locations and select stores in Canada and China, as Starbucks pursues a $600 million global Cold Brew opportunity. Both products continue to reinforce the company’s focus on Roastery-inspired craft at scale, as well as ongoing investment in the cold coffee category.
In core stores, Starbucks innovative, coffee-forward beverages such as Flat White, Cold Brew, Latte Macchiato and Iced Coconut Milk Mocha Macchiato all support the company’s premiumization strategy. In January, customers nationwide will be introduced to another Roastery offering with the introduction of the Cascara Latte. Made with the fruit of the coffee cherry, Cascara lends subtle notes of dark brown sugar and maple to classic Starbucks espresso. With its strong retail foundation and operational excellence, Starbucks is bringing Roastery-inspired innovations like this to market more rapidly than ever before, creating further distinction from competitors.
Starbucks is simultaneously innovating and expanding its food menu with products customers have been looking for, starting with the launch of Sous Vide Egg Bites in January 2017 – a wheat-free, low calorie, high protein, convenient breakfast; the spring launch of a Certified Gluten-Free Breakfast Sandwich; the expansion of the successful Bistro Box platform; as well as a regional rollout of delicious organic soups. Relevant innovation has become fundamental to unlocking the lunch daypart and building on existing breakfast daypart momentum, giving the company the ability to realize additional profitability and incremental sales.
Starbucks Breakfast Sandwich sales have more than doubled over the past four years and innovation will continue to drive meaningful growth, creating and meeting customer demand for innovation across all dayparts. Building on this strong momentum, Starbucks once again aims to double food growth over the next five years.
Extending the Digital Flywheel
Starbucks offers the largest and most robust mobile ecosystem of any retailer in the world, with more than 12 million Starbucks Rewards members (up 18% year on year), eight million mobile paying customers with one out of three now using Mobile Order & Pay, and more than $6 billion loaded onto prepaid Starbucks Cards in North America during the past year alone.
Starbucks is now unveiling an innovative conversational ordering system, My Starbucks Barista, powered by groundbreaking Artificial Intelligence (AI) for the Starbucks Mobile App. Starbucks Mobile App customers will be able to place their orders via voice command or messaging interface, delivering unparalleled speed and convenience, enhancing customer loyalty and engagement and further extending the accessibility of the Starbucks app. The My Starbucks Barista feature will roll out first on iOS in limited beta in early 2017 and be made available to more iOS and Android users in subsequent releases.
Starbucks digital flywheel has also continued to gain momentum with the launch of true one-to-one personalization. While still early in the evolution of this service, Starbucks hyper-personalized e-mail reward offerings – with more than 400,000 variations – have more than doubled customer response rates over previous segmented email campaigns, translating into increased customer engagement and, importantly, accelerated spend. Starbucks has delivered personalized offers to customers directly on the front screen of the mobile app.
By early 2017, the company expects to complete the rollout of suggested selling and recommendations (suggesting items for pairing or additions to a customer’s order) during Mobile Order and Pay checkout, which the company believes will further fuel engagement and growth. With Starbucks Rewards, the company’s new spend-based loyalty program, customers are finding increased value when being rewarded for bigger purchases. This enables the company to boost ticket, create greater marketing flexibility and pursue “Stars Everywhere” partnerships to create further Star earning opportunities, while reducing “order splitting.” With a 94% program retention rate, and new international markets on the horizon, the program is stronger than ever before.
