Starbucks Evolution Continues As Company Set To Roll Out Snacks Soon

Starbucks Corporation (NASDAQ:SBUX) is expanding its Evolution brand by introducing new snack bars under the brand’s Harvest line of products. In addition, its Evolution Fresh juices will be available in 8,000 cafes and grocery stores by the end of the year. ^[1] These products will eventually replace Pepsi’s Naked Juice and Kind snack bars that are currently sold at Starbucks stores.

Starbucks has also tied up with Whole Foods which will see the retail giant soon offering 12 Evolution Fresh juices and three Evolution Harvest snack bars at its stores. Starbucks has been careful with the positioning of these products. It doesn’t want these products to be portrayed as junk or processed. Hence, the frequent association with fruits or nuts.

It is no secret that Starbucks is trying to diversify its product offerings to include more than just coffee stores. The company feels it can leverage its brand to open up coffee stores internationally while in the more mature American market, it needs to diversify to grow at a brisk pace. The Evolution brand was acquired by Starbucks in November 2011 for $30 million. Since then, the company has opened some Evolution Fresh juice bars while also offering Evolution juices at its coffee stores.

Last year, Starbucks purchased Atlanta based tea company Teavana for $620 million. It plans to eventually operate Teavana stores in the same way that it runs its namesake coffee stores. In addition to these two, Starbucks also bought La Boulange, a San Francisco based bakery chain, with the aim to expand the food menu at its coffee stores.

See our full analysis for Starbucks Corportion

Big Plans For Packaged Products

The channel development segment includes packaged products as well as K-cups and brewers sold through third party retailers. The division already accounts for about a tenth of Starbucks’ sales with the company having big plans for this division. During the previous quarter’s earnings release, Starbucks announced a partnership with French giant Danone, which will see the company launch new specialty yogurt products (such as Greek yogurt) beginning next year. In the quarter prior to that, Starbucks announced the extension of its deal with Green Mountain as well. Starbucks also has ambitious plans of doubling its international footprint for this segment within the next two to three years.

While this division’s growth moderated to 8.8% in the latest quarter, it is still up 11.8% in the first three quarters of the fiscal combined. This division should continue to witness impressive growth as the company keeps expanding into new geographies and introduces new products.

We  have a $67 price estimate for Starbucks, which is about 5% below the market price.

Understand how a company’s products impact its stock price at Trefis

1. Starbucks Takes Evolution Fresh Juices, New Evolution Harvest Snacks to Whole Foods, August 27, 2013, wsj.com [↩]