Starbucks Coffee, Sure ... But Starbucks Booze?
"Starbucks represents something beyond a cup of coffee."
-- CEO Howard Schultz
This may literally be the case for some Starbucks fans. Many of us start our day with a cup of Starbucks (NAS: SBUX) coffee. Now, it seems the coffee maker is all set to offer the chance to cool off at the end of the day -- with a glass of wine or a beer.
Yes, Starbucks, the world's largest coffee purveyor, will offer wine and beer at about 25 of its outlets by the end of this year. The concept has already been tested at six of its existing stores.
Scripting a turnaround ...
Before Howard Schultz's second go as CEO, Starbucks was struggling with falling sales and earnings, due largely to overexpansion. However, once back at the helm in 2008, Schultz aimed at a complete turnaround, tightening the company's belt by shutting down a number of stores. His efforts have evidently borne fruit, with sales ricocheting back up and profits almost quadrupling since then. At the same time, Starbucks has also managed to grab a sizeable 33% chunk of the $26.5 billion U.S. coffee and snack market, according to a BISWorld Inc report. The company has done a pretty good job since the economic downturn, and Schultz is looking at more ways of boosting the top line even further.
Something for everyone
Starbucks' move to bring alcohol-based items onto its menu seems a good way to attract more customers into stores during the less-crowded afternoon and evening hours -- by catering to the non-coffee-drinking segment. But that's not all, as Starbucks is also serving munchies such as cheese plates and flatbread to complement the alcohol.
You may think that 25 stores out of Starbucks' 10,700 U.S. outlets is a very small number and not a big deal. But according to restaurant analyst Peter Saleh, Starbucks would not have embarked on such an unconventional move if it weren't planning to do it on a substantial scale. He thinks Starbucks can put beer and wine on the menus of at least 10% of its stores.
So how do coffee lovers (like me) react? Hmm ... I certainly don't mind! And many others share the same view. The news received very positive feedback on social media sites such as Twitter, with thousands of Starbucks' faithful seeming excited at the new prospect.
Any new idea is always met with some resistance, however, and some analysts believe the move may turn away a few customers. Bill Chidley, Interbrand vice president, thinks that selling alcohol may turn away families with young ones from coming into Starbucks' stores. If you ask me, this is one point Starbucks needs to look into seriously, and not lose core customers in the process of acquiring new ones. I guess the trick would be to make sure that the "Starbucks family environment" doesn't change no matter what they serve, so that everyone feels welcome.
Mimic others' success ...
With this move, Starbucks may be hoping to emulate the success of burger chain McDonald's (NYS: MCD) with improvisation. McDonald's moved out of its core area of expertise to serve specialty coffee items at its McCafe bistros. The burger giant also started to offer fruit smoothies, salads and wraps to help bring in customers throughout the day and offer a change from its regular fare.
Experimentation is just fine, and what's the harm if it brings in a few more dollars? This strategy may just pay off and help get newer, non-coffee-consuming customers into Starbucks stores. Who knows, it may help coffee sales as well, helping customers sober up before leaving!
In the end, we just need to wait and see how this concept works out, and also keep an eye on the scale at which Starbucks rolls out the initiative. We at The Motley Fool will keep you updated on the latest on Starbucks. All you have to do is simply click here and add the stock to your own personalized Watchlist.
At the time this article was published Fool contributor Shubh Datta doesn't own any shares in the companies listed above. The Motley Fool owns shares of Starbucks.Motley Fool newsletter serviceshave recommended buying shares of Starbucks and McDonald's. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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