Highlights from the Starbucks 2012 biennial conference: Growth coming in many ways.
Every two years, Starbucks hosts a conference discussing their business with investors, and fielding questions from analysts. Anyone can stream this via the Starbucks investor relations page. The conference lasts roughly six hours. I didn’t listen to the whole thing, but I wanted to throw out a few highlights from what I heard this morning, streaming this conference. Of course, senior officers at Starbucks (Howard Schultz, Cliff Burrows, Adam Brotman, Jeff Hansberry, Michelle Gass, and more) lead presentations speaking to highlights of what’s happening in their specific areas of the business.
Highlights from Howard:
First and foremost, Chad Moore deserves a huge shout out for the enormous success of his store. Howard Schultz mentioned this: “I want to isolate one store of the 18,200, and tell you a story about this store. This store is 1,000 square feet. It had 20 consecutive weeks this year of $100,000. It’s revenue in fiscal 12 at the end of September was approximately 5 million. It had double digit comps. And it was opened in 1971.”
Congratulations Chad Moore on your store’s great success!
Via is a $300 million business already! Someday, the CPG business will be the size of the retail business.
Starbucks plans 1,500 net new stores in the United States over the next five years.
Howard on Teavana: “Teavana is a company 15 years from its founding … – and they’ve built an extraordinary young, relatively small business. What we found was 300 mall-based stores with fantastic inter-economics. Over two to one sales to investment ratio. When we started talking about Teavana and meeting them. we discovered a few things. Their passion and knowledge for the highest quality tea in the world, we felt was unprecedented. Second, despite the unit economics of a mall-based store being so strong, they have no beverage business. What is our core capability? Our core capability is the understanding of creating hot and cold customized beverages and being able to integrate that into a retail store, as we did in 1987 at Starbucks. We are going to transform the entire tea category.”
Highlights from Cliff:
“The U.S. business has never been healthier.” Cliff went on to say, “Our traffic is being helped by many things we’ve done in stores – increasing our capacity at peak. It’s been helped by our MyStarbucksRewards loyalty program; it’s been helped by expanding the day-part focus, and also by introducing solutions for new need-states. The focus has been about how do we improve the quality of experience for our customers, the quality of their beverage, and speed of service – all things that really matter, and creating it in the right environment with our people. Now ticket itself has contributed about one to two percentage points over the last couple of years. And a very small part of that is price. But it has been about innovation. And it has been about selling more food, and a greater attach to our beverages.”
Evolution Fresh will be in more than 5,000 U.S. Starbucks stores by the end of 2013.
Starbucks has been experimenting with their “Evenings” stores which offer beer and wine, and an elevated food menu. It’s in 15 stores, and the results are encouraging.
Food at Starbucks accounts for 1.5 billion dollars, but only one in three customers are buying food with their beverage. A lot of room for opportunity.
Partner engagement is key. At Starbucks stores, more than 66% of stores have had their store manager in it for more than one year.
During the Q & A session, Cliff fielded a question that related to CPG diluting the brand. He talked about keeping the integrity of the brand, and not degrading it. I loved this Cliff-quote: “The customer has the relationship with brand and we have to keep putting deposits into that reservoir of trust.” #CliffForTheWin.
Highlights from Adam:
Adam made two over-arching points: “First of all, everything that we are doing and everything that I am talking today in the US, we’re integrating across the globe and across different channels, as Howard mentioned. You’re going to hear Jeff [Jeff Hansberry] talk about how we’re integrating digital and social and loyalty into our grocery channel . You’re going to hear John and Michelle talk about how we’re doing that across the globe. Secondly, I want to point out that there are a lot of other companies doing some or all of things. They’re doing them well and they’re doing them in big numbers. But no other company besides Starbucks is doing these things in combination the way we’re doing them, the size and engagement level the way we’re doing them – with the customer experience, and combining these digital platforms the way we are.”
There are more than 300,000 registered users on MyStarbucksIdea.com, and over 54 million Starbucks Facebook fans, and over 3 million Twitter followers. There are over one million followers on instagram.
There are over 15 million MyStarbucksRewards loyalty members, with about 5 million of them opted into to direct communications from Starbucks. Three million customers have earned their way to the gold level. By the way, at several points Adam mentioned being able to use purchase data from the Starbucks card purchases to be highly targeted, and predictive with models. And there is a great opportunity for Starbucks to communicate directly with customers through this platform. This reduces reliance on traditional paid advertising.
New MyStarbucks loyalty members are signing up at the rate of about 100,000 week. And per Adam, “With these numbers, keep in mind, we’re just getting started.”
Dollar reloads on Starbucks card is growing at 20% a year. There are about 2.1 million mobile payments a week, which has the positive effect on speeding the line.
Adam talked a lot about Square as part of an “open loop wallet.” (I must say, I felt very out of the loop listening to him on Square. I’m very attached to my physical card. I am behind the times!)
Highlights from Jeff:
Via Ready Brew is now nearly 300,000 million dollar business across 14 countries, and Starbucks continues to innovate with new flavors. In 2012, Starbucks grew the via business by 45%.
Customer adoption of the K-Cups has been strong. In the first 11 months, Starbucks has sold over five million cups, and now has a 16.3% market share.
Starbucks has been testing the “Starbucks Signature aisles” in the grocery stores. Stores that have been testing it, have seen a two to three times sales lift, and it will be rolled out to several hundred in 2013.
(Comment by Melody: I realize that these photos (scroll down) sent to me by a reader in Colorado must clearly be showing off one of these “Starbucks Signature aisles.” – Very cool!)
This conference is very long! I listened to about the first 3 hours (from 5am PST to about 8am PST), and quickly threw together these highlights before running out the door to work. Lots of interesting things to think about. I may later go back and add a few more highlights, if I have time this evening. I still would like to add in a few more of Jeff’s highlights, and add in some of Michelle’s section of the conference.
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