Starbucks lays out growth plans for key markets

Starbucks (SBUX) laid out a number of growth strategies for two of its key markets, US and China, at its Investor Conference on Thursday. Amid tough competition in the beverages market, particularly in coffee, the company has been seeing a drop in customer traffic to its coffee shops in the US.

In order to fuel customer traffic in both its US and China markets, the company has been simplifying its business operations and adopting new strategies. Last month, the company said it was planning to cut around 5% of its global workforce as part of its business reorganization efforts.

Eateries are adopting new strategies to boost sales, and delivery is turning into a desirable option for customers who prefer to have their meals at home. As this trend impacts traffic at its stores, Starbucks is looking to provide coffee delivery service across the US through its partnership with UberEats in order to reach more customers.

The company has been testing its delivery service in Miami for the past two months and now plans to expand it to around 2,000 of its stores by early 2019.

Starbucks is also looking to offer more cold drinks, which currently comprise a significant portion of its sales, and the coffee chain plans to make Nitro cold brew available at all its company-operated stores in the US by the end of next year. Nitro cold brew is nitrogen-infused cold brew coffee that comes out of a tap and it has turned into a popular offering for Starbucks.

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As part of its Global Coffee Alliance with Nestle SA, Starbucks will roll out a range of its branded products for the Nespresso and Dolce Gusto platforms and Roast & Ground and Whole Beans coffees in CPG and Foodservice channels next spring.

In China, Starbucks has a strategic partnership with Alibaba (BABA) and the company has been expanding its delivery service through the food delivery platform Ele.me. The service, which launched three months ago, currently spans 2,000 stores across 30 cities.

Starbucks has launched two Star Kitchens at two FRESHIPPO supermarkets in Shanghai and Hangzhou. The company also unveiled its first virtual Starbucks store in China, which allows customers to order products through its app and have them delivered.

Starbucks expects the Global Coffee Alliance with Nestle to be accretive to adjusted EPS in fiscal 2020 and 2021, helping to deliver growth of at least 13% annually for those two years. Longer term, the company expects revenues to grow 7-9% and adjusted EPS to grow at least 10%.

Starbucks’ stock was down 2.5% during morning hours on Friday.

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