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In 5 years, your whole day could revolve around Starbucks

Just when you thought the coffee behemoth can't possibly get any bigger, it announces a five-year plan to grow even more through non-traditional venues,expanded dayparts, mobile ordering and delivery.

December 5, 2014

Within the next five years, it is entirely conceivable that your entire day could revolve around Starbucks.

You'll start your day by popping a Starbucks K-Cup in your Keurig and brewing up your morning cup. You'll order a delivery of coffee to your desk mid-morning. If you want to get out and stretch your legs at lunch time, you'll use your smartphone to order your lunch or snack ahead and save a few minutes so you can get back to work within the hour. After you wrap up your day, you'll stop by Starbucks with some colleagues to unwind with a glass of wine.

Just when you thought the coffee behemoth can't possibly get any bigger, it announces a five-year plan to grow even more by filling gaps through non-traditional venues, adding occasions through expanded dayparts, and making ordering so easy and efficient for customers that it makes more sense to choose Starbucks than to not choose it.

"We have to maintain the entrepreneurial DNA of the company," said Howard Shultz, chairman, president and chief executive officer, during the Investor Day held Dec. 4. "We have to have the constant curiosity to see around corners and see what others don't see, and we have to have the courage and conviction to make big bets."

Starbucks leaders intend to grow revenue from its current $16.4B to $30B in the next five years, and reach a store count of more than 30,000 globally from the current 21,700. How does it plan to get it done? Starbucks' leadership outlined seven strategies for growth during the Investor Day:

Be the Employer of Choice.

Global Chief Strategy Officer Matt Ryan emphasized the importance of Starbucks partners, and the importance of attracting and retaining the best partners. Of the people who consider purchasing at Starbucks, 47 percent do so because of their connection to a partner, according to Ryan.

COO Troy Alstead cited the company's long-standing history of above-norm partner benefits, including offering healthcare and stock options, discounts on merchandise, and the recently-launched Starbucks College Achievement Plan.

Lead in coffee.

Starbucks is innovating with its new Starbucks Reserve Roastery and Tasting Room in Seattle, which opened for the investor meeting on Dec. 5. The roastery will feature the new Starbucks Reserve line of micro-lot coffees. Several Starbucks Reserve stores, which will feature super-premium coffee, are also in the works.

Grow the store portfolio.

Despite the oft-uttered criticism that there's "a Starbucks on every corner," there's room for the brand to expand in different formats, according to Ryan. Smaller footprint express stores have been launched in New York, and trucks have been deployed to college campuses. These different formats allow Starbucks to fit in to spaces where traditional stores don't make sense, but where customers want to have a Starbucks experience.

International growth will be a significant factor, with one-third of growth expected to come from new and existing markets.

China, already the fastest growing market with an average of one new store opening every day, will up the ante in 2015 and open a new store on the average of every 18 hours, said Belinda Wong, president of Starbucks China.

China will open its 1,800th store before then end of the year, and is expected to double its footprint to 3,400 by 2019.

Create new occasions.

Starbucks has broadened its reach into the lunch daypart with expanded sandwich offerings, and added snacks and beverages that reach into afternoon breaks.

On the horizon: an expansion of its Starbucks Evening concept, which features beer and wine offerings after 4 p.m. Starbucks intends to roll out the option to around one quarter of its U.S. stores by 2019.

Consumer Packaged Goods growth.

There are more than a million places outside a Starbucks retail store where a customer can find Starbucks products, said Michael Conway, president of Global Channel Development, including in 120,000 grocery and convenience stores.

"The fastest growing segment in the coffee category is K-Cups and Starbucks once again grew faster than the category in 2014 at more than 34 percent," said Conway. "Since we launched K-Cup packs in 2011, we have shipped 2.3 billion K-Cups and are projected to ship over 1 billion in 2015, led by our newest innovation – iced coffee K-cups."

Build Teavana.

The global tea market has grown by 7 percent in recent years to become an $109B industry, said Ryan.

Starbucks wants to do for tea what it did for coffee, with an emphasis on its Teavana Tea Bars, Teavana in Starbucks stores and grocery aisles, and other formats.

Extend digital engagement.

Starbucks launched mobile order and pay in its Portland market just ahead of its Investor Day.

Mobile order and pay will drive the topline by increasing customer purchases. Because the process of mobile order and pay is much more efficient than the traditional method of waiting in a line to place an order, waiting for the order to be made and then picking up the order, customers might choose to make a purchase where before they wouldn't have had time.

The mobile order and pay builds on Starbucks strong prepaid card/loyalty program. Currently, 32 percent of payments in U.S. stores are made through prepaid cards, and half of those are made from mobile, said Adam Brotman, chief digital officer.

Delivery is also on the horizon, and will roll out in select markets in late 2015, said Brotman. Starbucks is exploring two approaches: commissaries in high-density areas, and traditional delivery from stores in suburban settings.