Article

Digital, food, Oprah highlight Starbucks' Shareholders Meeting

The beer and wine tests are going better than expected and will be expanded to multiple cities.

March 19, 2014 by Alicia Kelso — Editor, QSRWeb.com

Oprah Winfrey made a cameo appearance at Starbucks' Annual Shareholders Meeting today to tout her partnership with the brand as it accelerates its tea positioning.

Just before Mother's Day, "Oprah Chai" will launch exclusively at all Starbucks and Teavana locations in the U.S. Oprah, a self-avowed tea enthusiast, came up with the blend herself, and 100 percent of all proceeds from the offering will go to charities that help youth education.

CEO Howard Schultz said Starbucks is well-positioned to ignite the $90B tea category as it did for coffee.

Other highlights from the meeting include:

Offerings

COO Troy Alstead said the company experienced record revenues of $14.9B in 2013. Among its sweet spots are La Boulange bakery offerings, which are on pace to be in all stores by the end of the year, and K-Cups, which grew by nearly 50 percent in the past year.

Digital/mobile

Chief Digital Officer Adam Brotman said mobile payments now represent 14 percent of all in-store transactions in the U.S. The brand's new iPhone app was officially released today, featuring a new design and new features, including the ability to pay and tip. A similar app will be launched "soon" for Android.

The My Starbucks Rewards loyalty program continues to grow, now representing more than 25 percent of all transactions. Globally, Starbucks Cards are available in more than 28 countries, and more than $18 billion has been loaded onto Starbucks Cards since the start of the program in 2001. "We have the world's most successful mobile loyalty and payment platform of any retailer in the world," Brotman said.

Starbucks will continue to invest in "robust digital and mobile" platforms, and plans to test mobile ordering at some point this year, Brotman said.

Coffee positioning/competition

Although Schultz didn't mention any competitor brands by name, he vowed to maintain a coffee leadership position by "sourcing higher quality coffee than at any other time in company history."

That sourcing comes courtesy of Starbucks' recently announced acquisition of Hacienda Alsacia, a 240-hectare coffee farm in Costa Rica that is now acting as a global agronomy and research center.

Schultz said the working farm is actively refining Starbucks Coffee and Farmer Equity (C.A.F.E.) Practices model and responsible growing practices, housing a nursery of more than 160,000 hybrid seedlings. He said the company will continue to evolve its Starbucks Reserve program by the fall, with new packaging and offerings.

Starbucks Reserve includes small batch coffee available to customers by the half-pound or cup with the company's patented Clover brewing system.

"This coffee is special, it's exotic; the likes of which the marketplace hasn't seen before," Schultz said. "We're not going to allow any competitor to take (coffee leadership) away from us. This coffee is going to wow our customers. I can assure you with this breakthrough innovation, we're going to have coffee that is second to none."

Gluten-free and alcohol tests

Finally, during the Q&A session, Schultz and Almstead answered questions about climate change, GMOs, Russia and more. Starbucks will continue to test some gluten-free options in some markets, and will also expand its beer/wine test to new markets.

"We have tested, many, many times, gluten-free products and even though people say they want them, they haven't bought them. So the challenge is making sure we satisfy people (that want them) and don't create a situation where we have too many products not being sold," Schultz said. To do so, the company will create a "narrow line" of gluten-free products in the next few months. "Not on a national scale, but in a few test markets," he said.

The test markets for beer and wine are going "quite well and better than we originally thought," Schultz said. Therefore, Starbucks will be expanding the evening daypart offerings into multiple cities and "over time, they will be a bigger part of the business. It will never be coffee, but it will be incremental."