Why Introduction of “Almond Milk” Is Starbucks’ Investment In The Future?
According to a research by Mintel, nearly 49% of Americans consume non-dairy milk, although not exclusively. In tandem, the sales of dairy milk are projected to drop by 11% by 2020. Consumers are shifting to non-dairy milk as a preference and not a necessity, due to the health benefits associated with the former. In order to tap into this demand and meet its top consumer product request, Starbucks Corporation‘s (NASDAQ:SBUX) recently announced that it will be introducing almond milk in its stores, in addition to the other non-dairy alternatives such as coconut milk and soy milk, which are already sold by the coffee giant. Beverage spend per customer visit is a key driver for Starbucks’ valuation, according to our estimates. With consumers willing to shell out extra dollars for non dairy alternatives, this number can increase as the company comes up with popular alternatives. As Starbucks looks to adapt to changing consumer preferences to retain its competitive edge, the introduction of almond milk can help the company to drive revenues in the long term, in our view.
Popularity Of Almond Milk Soaring As Consumers Prefer “Healthy” Alternatives
Between 2013 and 2014, sales of non-dairy milk products grew by 40%, with almond milk being the most popular in this category. Major grocery outlets such as WalMart and Costco have been stocking this product and Dunkin’ Donuts is already using it as a cow milk substitute in its beverages. As an increasing number of consumers prefer “low calorie” alternatives and look to reduce animal products in their diet, almond milk is emerging as the most popular alternative. Starbucks is looking to create its own almond milk recipe to complement its hot and iced beverages. This alternative will also inspire other customizations for Starbucks’ customers who prefer non-dairy milk in their beverages. We believe these customized beverages with almond milk can attract more consumers who will be willing to shell out extra dollars for the beverage of their choice, impacting the Beverage Spend per customer visit at Starbucks positively. According to our estimates, this metric will increase moderately from around $5.20 in 2016 to nearly $5.40 by the end of our forecast period.
Starbucks received nearly 96,000 requests to add almond milk as a dairy alternative to its menu and the company will charge consumers an additional $ 0.60 to use this as a substitute in their beverages. We believe it is critical for consumer-centric food and beverages companies such as Starbucks to focus on changing consumer preferences and adapt accordingly. This strategy will be essential to drive long term growth. Starbucks is ensuring that it maintains its competitive edge by tailoring its products according to consumer demands.
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