Starbucks to Open Another 1,500 Cafes in the U.S.

Starbucks to Open Another 1,500 Cafes in the U.S.By CANDICE CHOI

NEW YORK -- Another Starbucks may soon pop up around the corner, with the world's biggest coffee company planning to add at least 1,500 cafes in the U.S. over the next five years.

The plan, which would boost the number of Starbucks (SBUX) cafes in the country by about 13 percent, is set to be announced at the company's investor day in New York Wednesday.

In addition, the Seattle-based company says it will eventually serve a new brand of tea in its cafes. Rather than its Tazo tea, Starbucks is turning its attention to Teavana, which it announced it would acquire last month.

Worldwide, the company says it will have more than 20,000 cafes by 2014, up from its current count of about 18,000. Much of that growth will come from China, which the company says will surpass Canada as its second-biggest market.

Although Starbucks has been intensifying its growth overseas and building its packaged goods business back at home, the majority of its revenue still comes from its more than 11,100 cafes in the United States.

In an interview ahead of its investor day, CEO Howard Schultz said the U.S. expansion plans to be announced Wednesday are based "on the current strength of our business"

Just a few months ago, the company had predicted it would open just 1,000 new cafes in the country over the next five years.

The upbeat expansion plans mark a turnaround from Starbucks' struggles during the recession. After hitting a rough patch, the company brought back Schultz as CEO in 2008 and embarked on massive restructuring effort that included closing 10 percent of its U.S. stores.

Cliff Burrows, who heads Starbucks' domestic business, said the problem wasn't that Starbucks was oversaturated, but that the company hadn't been careful about its store openings. That led to cafes in locations where signs or traffic might not be optimal, he said.

Burrows said Starbucks has gotten more sophisticated, and noted that the cafes opened in recent years are among the company's best performers.

Sales at new cafes are averaging about $1 million a year, for example, above the company's target of $900,000. It costs about $450,000 to build a new cafe.

Since Starbucks already has a broad footprint, the company's expansion is intended to "deepen" its presence with additional stores in markets across the country, said Troy Alstead, Starbucks' chief financial officer. And even as it expands, Starbucks said it expects to maintain growth at cafes open at least a year. The figure, a key metric of health, has ranged between 7 percent and 8 percent globally in the past three years.

The continued sales growth in the U.S. will be fueled by the new products, such as Evolution premium juices and Via single-serve coffee packets. Looking forward, Starbucks is also looking to improve its food menu and is testing a new menu of baked goods from La Boulange, a small San Francisco-based chain it acquired earlier this year. The new croissants, loaf cakes and other items will spread to about 2,500 cafes next year and go national sometime in 2014, Burrows said.

In a test aimed at building sales in the evening hours, the company also started serving beer and wine at about a dozen locations earlier this year, with food such as chicken skewers and dates wrapped in bacon.

And most recently, Starbucks announced plans to acquire Teavana, a chain that has 300 locations in shopping malls. When the announcement was made last month, Schultz said the company would "do for tea what it did for coffee."

That includes plans to expand Teavana's presence beyond the shopping mall with stand-alone shops that have "tea bars" that serve specialty drinks. The company declined to say when Starbucks cafes would begin serving Teavana drinks -- and it hasn't decided on whether it will continue to sell Tazo in cafes.

To build its packaged-goods business, Starbucks plans to let customers earn points on their My Starbucks loyalty card starting next year when they purchase Starbucks bagged coffees in supermarkets and other outlets. Customers currently earn points only when they make purchases in Starbucks stores.

The picture isn't rosy around the globe, however. Europe remains a sore spot for Starbucks, with a key sales figure falling in the region 1 percent during the latest quarter. In an effort to boost results, the company has been closing underperforming stores and licensing of some of its cafes in the region.




Increase your money and finance knowledge from home

Investor’s Toolbox

Improve your investing savvy with the right financial toolset.

View Course »

Small Cap Investing

Learn now to invest in small companies the right way.

View Course »

Add a Comment

*0 / 3000 Character Maximum

19 Comments

Filter by:
abudotcom

Didnt they closed over 600 just a couple of years ago?

December 05 2012 at 11:21 AM Report abuse +1 rate up rate down Reply
BABIN

Well...will be more and more low paying jobs to offer in USA, why not open 1,500 Factories with real productions, with living paying wages, with health insurance and employ people even without school with good wages too...and by the way in USA is everything overpriced and if we just pull out C.C. out of the system let's see how many ''big lines'' will be in any store where peoples using C.C. (and that mean not paying in full every month, just look the numbers for personal debt in USA) leave only debit card and let's see how many can buy any product in here and survive in end of the each month after paying all other regular living bills...and all that gives us low paying service jobs in here, most of peoples in USA works for $8.00 to $12.00 per hour and after all taxes and deductions what in God sake person can do about after that...NOTHING....just use C.C. and cover that big hole and survive for end of the each month and round up big personal debt month after month...AMEN...

December 05 2012 at 10:59 AM Report abuse +1 rate up rate down Reply
jay

I refuse to go to any Starbucks because of the stunt they pulled on 9-11 when they charged firefighters in NYC for water. I hope Starbucs chokes on ther coffee beans.

December 05 2012 at 10:55 AM Report abuse +1 rate up rate down Reply
phpoling

We don't need extra 1,500 Starbucks Cafes for sure. We got too many around here and overpriced

December 05 2012 at 10:50 AM Report abuse rate up rate down Reply
erink91321

This Recession is Not over. It is going through a Temporary upward Blip similar to what happened in the early 1930s when People thought the worst was over. Stocks rose and sales rose for a short time and then that blip collapsed spiralling the economy to the bottom. Doing the Math, the conclusion calls for the same, if not worse, to happen again by mid next year No matter what Congress or the White house does. Be Prepared

December 05 2012 at 10:48 AM Report abuse +2 rate up rate down Reply
GeorgeT

Now I know the recession is well on the way to beingover. Car and home sales are up, and now a business selling $4 cups of flavored coffee is expanding.

December 05 2012 at 10:26 AM Report abuse rate up rate down Reply
3 replies to GeorgeT's comment
yearsocrapleft

JUST KEEP FIGHTING THIS ISLAMIC TERRORIST MUSLIM CLOWN BACK TILL HE STOPS HIS "OUT OF CONTROL SPENDING ~~ABOLISH'S HIS UNCONSTITUTIONAL WELFARE "HELL: CARE N DEPORTS "ALL" ILLEGAL IMMIGRANTS THAT "BROKE" INTO AMERICA. ! ~~THIS IS WAR ! ! ! ! ! N THIS IS WHAT ALL AMERICANS WANT. !! CUT THE FARKIN TAXES . ! ! !

December 05 2012 at 10:25 AM Report abuse -2 rate up rate down Reply
erink91321

Nothing like building yourself Out of business. Stabucks will see what I mean by next year

December 05 2012 at 9:35 AM Report abuse rate up rate down Reply
David

Sorry about the 3 "WHYS?, but this goofy website doesn't always work!

December 05 2012 at 9:19 AM Report abuse +2 rate up rate down Reply
David

WHY?

December 05 2012 at 9:17 AM Report abuse rate up rate down Reply