* Evolution Fresh, La Boulange, Teavana buys in focus
* Plans 3,000 new Americas stores by 2017, over half in US
* China to overtake Canada as No. 2 market in 2014
* Same-store sales in China/Asia Pacific held up in Oct, Nov
* Shares down 1.5 percent
By Lisa Baertlein
NEW YORK, Dec 5 Starbucks Corp plans to
increase the number of its cafes in the Americas by more than 20
percent by opening more than 3,000 new shops there in the next
five years as it looks to rely on tea and juice as much as
coffee, it said on Wednesday.
The world's largest coffee chain is also finished with
acquisitions for the time being, after buying juice seller
Evolution Fresh for $30 million and Bay Bread LLC's La Boulange
Bakery for $100 million over the last 13 months. Starbucks also
has an agreement to purchase tea store chain Teavana Holdings
Inc for $620 million.
"We're pretty full up at this time in terms of our resources
and capabilities," Chief Executive Officer Howard Schultz said
at Starbucks' investor conference in New York on Wednesday. "At
this moment in time, we have enough to handle."
Food long has been a weak link at Starbucks, which plans to
roll out sweet and savory La Boulange pastries and other goodies
at 2,500 of its company-operated U.S. shops by the end of next
year. Starbucks also expects to have Evolution Fresh juices in
more than 5,000 U.S. stores by the end of 2013.
The company is also expanding and experimenting with new
It has opened four Evolution Fresh juice stores and one Tazo
tea shop in the United States, and it plans to add "tea bars" to
existing Teavana stores.
The goal at Teavana is to replicate the success the company
had adding coffee drinks at its early Starbucks stores, which
sold whole bean coffee.
"There is always a risk when you take on all these brands,"
Bernstein Research analyst Sara Senatore said, but she added
that Starbucks had mitigated that risk by making deals that fit
with its long-term growth plans, which focus on increasing its
reach beyond coffee and the four walls of its cafes.
Schultz admitted that Starbucks' growth in 2007 and 2008 -
the years before its business plunged with the financial crisis
- was "undisciplined." The company is not returning to that
prior strategy of "growth for growth's sake," he said.
Starbucks' consumer packaged goods business, which sells
such items as whole bean coffee and bottled drinks through
grocery stores and other retailers, could one day be as large as
the cafe chain, Schultz said.
Investment Technology Group analyst Steve West said he was
encouraged that the company is building a "tiered strategy" for
those packaged goods. Based on the company's moves thus far, it
appears that Starbucks coffee and Teavana teas are in the
core/premium categories, while Seattle's Best Coffee and
potentially Tazo tea are more mainstream brands.
When Starbucks' fiscal year ended on Sept. 30, the company
had 18,066 shops around the world, with just over 12,900 in the
Americas. The United States dominates that region and will get
more than half of the 3,000 planned new stores that the company
announced on Wednesday.
Starbucks expects China to overtake Canada as its
second-largest market in 2014. The fast-growing China and
Asia-Pacific region will have nearly 4,000 cafes by the end of
2013, including 1,000 in mainland China, where Starbucks said it
was on track to have 1,500 cafes in 70 cities in 2015.
John Culver, president of Starbucks' China/Asia Pacific
business, said sales at established stores in the region held up
in October and November, following a 10 percent increase in the
fiscal fourth quarter that ended Sept. 30.
"We have seen the momentum we had in the fourth quarter
carry over," Culver said.
Investors are closely tracking Starbucks' new at-home
Verismo coffee and espresso brewer, which the company is using
to grab a piece of the fast-growing single-serve market
dominated by Green Mountain Coffee Roasters Inc and
The machine sells for $199 or $399 depending on size and
functions. Over time, Starbucks expects to get significant
revenues from sales of the coffee and milk pods used with
Early reviews on Verismo have been mixed - with the main
complaint being the unappealing taste of the milk from the
shelf-stable milk pods that have been held up as selling point
for Starbucks' machine.
Jeff Hansberry, Starbucks' president of channel development
and emerging brands, said Verismo sales are "in line with our
expectations" but he did not answer an analyst's question about
the machine's strengths and weaknesses.
Separately, Starbucks has said it would announce changes to
its UK tax policies this week, following criticism from
lawmakers and the media over strategies that let it minimize
Starbucks shares were down 1.5 percent at $50.32 in
afternoon trading on Nasdaq.