Starbucks thinks outside coffee cup

PUBLISHED : Monday, 02 April, 2012, 12:00am
UPDATED : Monday, 02 April, 2012, 12:00am


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Coffee giant Starbucks aims to widen its range of mainland investments, including an expansion outside of its core business.

Starbucks China and Asia-Pacific president John Culver said the company's plans included introducing a new line of premium single-cup coffee and machines, entering the 'energy drink' category, and developing its fruit juice stores.

'We are ramping up investments in ... staffing, training, development and systems,' Culver said, without disclosing the cost of these activities.

Seattle-based Starbucks, which posted a 16 per cent year-on-year increase in total revenue to US$3.4 billion in its fiscal first quarter ended January 1, has about 10,000 staff on the mainland and directly owns stores in 44 cities. 'We're closing in on 600 stores in the coming months,' Culver said, adding that Starbucks was 'on track' to have 1,500 stores in more than 70 mainland cities by 2015.

He said the company also saw 'a big opportunity in [mainland] China' for extending its coffee business into mainland consumers' homes and offices.

The new Verismo system makes espresso drinks and brewed coffee one cup at a time. Slated for release later this year, Verismo machines, single-cup coffee and milk pods will be sold at some Starbucks stores and specialist retailers in the United States, Canada and selected international markets.

'We're working on our rollout plans right now,' Culver said.

Starbucks estimated the premium single-cup coffee category to be a nearly US$8 billion-a-year global market. Companies competing in this category included Kraft Foods and Nestle, which has heavily promoted its popular Nespresso brand. Starbucks had earlier licensed coffee pods for Kraft's Tassimo coffee-brewing system, but ended that deal last year.

Market research firm Euromonitor International said: 'Though [coffee] pods have been ubiquitous for a number of years in offices, it was only from 2009 and 2010 when these saw great success in the retail market.'

Culver said Starbucks, which has more than 17,000 retail stores worldwide, would also build a new campaign on the mainland later this year around its recently launched 'Refreshers' low-calorie drinks, which combine green coffee extract with fruit juices, but with no coffee taste. The line allows Starbucks to compete in the rapidly expanding energy drinks market, where Red Bull is still the world's leading brand, selling 4.63 billion cans worldwide last year.

The energy drinks market segment was estimated by Starbucks to be worth about US$8 billion last year.

Canned ready-to-drink Refreshers will be introduced widely this month in the US through grocery and convenience stores. Made-to-order Refreshers will also be available at Starbucks stores later this year.

Culver said Starbucks' acquisition of Evolution Fresh, a maker of premium-priced fruit juice drinks, last November was intended to expand the firm's horizons beyond coffee.

'We're going to ... look at how we're going to bring it to other parts of the world,' Culver said. 'Asia represents a big opportunity and I want to move as quickly as possible to try and bring it here.'