3 Ways Starbucks Plans To Drive Growth In 2013

by Trefis Team
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Trefis
SBUX
Starbucks
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Starbucks Corporation (NASDAQ:SBUX) recently announced its Q4 and fiscal 2012 earnings in which the company raised the forecast guidance for fiscal 2013. The announcement naturally cheered the market which saw the stock climbing 10% after the earnings call. The company’s strong results were helped by a solid performance in the U.S. as same-store sales rose 7% with a 5% gain in the number of transactions.

The number of transactions were boosted by the introduction of new products such as Starbucks Blonde and Pumpkin Lattes and the retail of Evolution Juice bottles and K-cups in its coffee shops. With big plans lined up, Starbucks wants to ensure the momentum is carried over to the next fiscal year as well.

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1) Evolution Juices

Evolution bottled juices are now available in 2,200 of its stores in the West Coast and the company plans to expand its distribution further in fiscal 2013. Evolution Fresh Inc, a juice company, was acquired by Starbucks in November 2011 for $30 million. Currently, there are only 3 juice bars under the brand but most of its sales are through Starbucks’ traditional coffee stores and grocery shops.

Furthermore, Starbucks is also building a new production facility for Evolution, whose capacity will be four to five times that of the present facility. The company can then accelerate Evolution’s store openings as well as expand the brand to more of its coffee stores and grocery shops once the production facility gets completed in 2013. Starbucks’ established distribution networks will be a key factor in determining the reach and consequently the sales of the juice brand.

2) La Boulange Bakery Products

Yet another thing that Starbucks will be hoping to build upon is La Boulange, the San Francisco based French bakery chain that the company acquired in the first half of 2012. Currently, Starbucks is in the testing phase of La Boulange products in select stores but plans to roll out the entire range in 2,500 of its company-operated stores across the U.S. beginning in the spring of 2013. Food now contributes more than $1.5 billion to Starbucks’ total revenues and is becoming an increasingly important revenue stream for the company.

3) Verismo Single Cup Brewers

Last but certainly not the least is Verismo, the single cup brewer system launched by the company in September. It’s hard to predict how many brewers the company will sell in the coming year given the volatile dynamics of the brewer market but going by the initial reviews and the brand perception, the numbers are generally expected to be solid. Moreover, its strong sales will also ensure the sales of its K-cups also remain high.

We have a $58 price estimate for Starbucks, which is about 15% higher than the current market price.

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