Star­bucks ex­tracts more money with pricier drinks, food

The China Post - - WORLD BUSINESS - BY CANDICE CHOI

Star­bucks is ex­tract­ing more money from cus­tomers with of­fer­ings like a “Flat White” espresso drink and re­vamped baked goods that cost a lit­tle more.

The Seat­tle- based chain re­ported a higher quar­terly profit Thurs­day, with sales jump­ing 7 per­cent at es­tab­lished U.S. stores. The com­pany said much of the in­crease came from higher spend­ing per visit.

New drinks like the “Flat White” espresso drink and Teavana “Shaken” iced teas help drive up sales be­cause they’re a lit­tle pricier than other drinks, Star­bucks Chief Fi­nan­cial Of­fi­cer Scott Maw said. He noted the com­pany is also charg­ing more for baked goods like crois­sants, which are be­ing made with new recipes.

“What we’re see­ing is a pre­mi­u­miza­tion, a trade-up,” Maw said in an in­ter­view.

In a con­fer­ence call with an­a­lysts, CEO Howard Schultz said the “Flat White” and new cold­brewed iced cof­fees also help ex­tend the com­pany’s po­si­tion as a “cof­fee author­ity.”

Dunkin’ Donuts, which has been try­ing to ap­peal to new cof­fee drinkers with the in­tro­duc­tion of a dark roast last year, said ear­lier in the day that sales rose 2.7 per­cent at es­tab­lished U.S. lo­ca­tions.

Dur­ing its sec­ond fis­cal quar­ter, Star­bucks said its U.S. sales bump was also helped by a 2 per­cent uptick in cus­tomer traf­fic, which trans­lated into an ad­di­tional 10 mil­lion vis­its. That was driven in part by peo­ple com­ing in to re­deem the US$1.6 bil­lion that was loaded onto gift cards dur­ing the hol­i­days.

The com­pany is also con­vinc­ing peo­ple to buy more food in gen­eral.

Over­all food sales in the U.S. were up 16 per­cent from a year ago, while break­fast sand­wich sales were up 35 per­cent, the com­pany said. A key part of Star­bucks’ strat­egy for con­tin­u­ing to drive up sales is its ex­pan­sion into the af­ter­noons and evenings, when its stores tend to be less busy. Al­ready, Star­bucks says about a third of or­ders in­clude a food item and that the fig­ure has been tick­ing higher.

The com­pany is also testing a pro­gram in about 30 lo­ca­tions where it sells al­co­hol in its cafes in the evenings, and has said plans to ex­pand that more broadly this year.

Glob­ally, sales at es­tab­lished lo­ca­tions rose 7 per­cent dur­ing the pe­riod. That in­cluded a 12 per­cent in­crease in Asia, while the unit en­com­pass­ing Europe, the Mid­dle East and Africa rose 2 per­cent.

Star­bucks still ex­pects global sales at es­tab­lished lo­ca­tions to rise in the mid-sin­gle dig­its for the year.

For the pe­riod ended March 29, Star­bucks’ profit jumped 16 per- cent to US$494.9 mil­lion, or 33 cents per share, which was in line with ex­pec­ta­tions.

To­tal rev­enue rose 18 per­cent to US$4.56 bil­lion, more than the US$4.53 bil­lion Wall Street ex­pected.

Shares of Star­bucks Corp. were up 4.3 per­cent at US$51.54 in ex­tended trad­ing.

AP

In this March 18 file photo, Star­bucks CEO Howard Schultz speaks at the cof­fee com­pany’s an­nual share­hold­ers meet­ing in Seat­tle.

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