Commentary

Starbucks Rolling Out Delivery In 2,000 Of Its U.S. Stores

Starbucks yesterday said that it would expand a pilot program using Uber Eats to deliver coffee to desk- and chaise-bound customers in Miami and Tokyo to nearly a quarter of its roughly 8,500 company-owned stores in seven unnamed U.S. metropolitan areas in the coming months.

“Delivery is becoming a source of added sales for many restaurant chains that have seen their dining room traffic erode. Many chains say delivery has attracted customers who don’t come in to eat,” Julie Jargon points out for the Wall Street Journal

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“There are unique challenges involved in delivery, including getting food to customers’ homes quickly and while still hot -- something that could be particularly problematic for coffee. Delivery fees also can be a turnoff for customers placing small orders,” Jargon continues.

“The real model for Starbucks Delivers is China, where delivery, offered by a subsidiary of Chinese commerce giant Alibaba, has grown from 150 stores at the end of September to more than 2,000 Starbucks locations in 30 cities now,” writes Benjamin Romano for the Seattle Times

“In China, Starbucks has developed spill-proof lids, tamper-proof packaging seals, insulated delivery containers, and algorithms to route orders to the best location to fulfill them. It also has trained delivery drivers from Alibaba’s Ele.me delivery service on how to handle its products,” Romano adds.

Meanwhile, “Uber Eats, launched in 2014, has become the largest food delivery service outside China. The business operates in more than 350 cities in 36 countries and has been pushing into new markets across Europe, the Middle East, Africa and suburban North America this year. Corporate partners include McDonald’s, Popeyes and Subway,” Alistair Gray, Andrew Edgecliffe-Johnson and Shannon Bond report for Financial Times.

“Gross bookings -- the total amount Uber Eats takes in before paying couriers and restaurants -- hit $2.1 billion in the third quarter, up 40% from the $1.5 billion in the first quarter and 150% higher than a year ago. Eats’ bookings accounted for about 16.5% of the company’s overall gross bookings.”

The announcement was made at Starbucks' biennial investor day event in New York, where the company also reported “it expects global same-store sales growth between 3% and 4% annually in the long term, roughly in line with a forecast that estimates sales growth to be at the lower end of 3% to 5% this year,” write Reuters’ Aishwarya Venugopal and Nivedita Balu. “Starbucks has been struggling to lure diners to its restaurants as it faces severe competition from smaller coffee chains that offer exotic coffees as well as fresh food.”

One of its responses to that trend has been Nitro, the nitrogen-infused cold brew coffee first sold at its Roastery and Tasting Room in Seattle in 2015 and gradually rolled out to about 2,500 cafes, all U.S. locations.

CFO Roz Brewer noted in a presentation yesterday that Frappuccino drinkers tend to treat the drink as a one-off purchase, Danielle Wiener-Bronner writes for CNN Business, but customers are more loyal to cold brews and iced coffees.

“These categories are more habitual and create more brand affinity,”  Brewer said.  

But “the company is not moving away from Frappuccinos, Brewer noted. Starbucks is just offering new options for the blended drinks and expanding its cold drink portfolio,” Wiener-Bronner adds.

“One new menu item Starbucks aficionados will see soon was previewed on Thursday for the assembled analysts and journalists -- Spiced Meringue Macchiato,” reports Zlati Meyer for USA Today. “It’s cold-pressed espresso poured through spiced meringue cold foam on ice with ‘winter spices of cinnamon, ginger, nutmeg and clove,’ according to the investor day menu.”

Back in China, meanwhile, Starbucks is using Alibaba technology to create a unified online experience for customers in a virtual store, Charlotte McEleny reports for The Drum.  

“It brings together the Starbucks app and mobile apps within the Alibaba ecosystem, including Taobao, Tmall, and Alipay. For customers, having one place to find Starbucks services is an improved experience but, for Starbucks, it allows the brand to better track its success with sales via a single access point. These services include, Starbucks’ digital offerings such as ‘Starbucks Delivers,’ 'Say it with Starbucks’ social gifting and merchandise available from Starbucks’ Tmall flagship store, as well as Starbucks Rewards,” McEleny writes.

 
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