Starbucks Focusing on Transformational Innovations

SEATTLE — Starbucks Coffee Co. is brewing up changes to meet consumer demands.

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Chairman, President and CEO Howard Schultz said.

Over the next five years, Starbucks will continue "to lean into this new era by innovating in transformational ways" across coffee, tea and retail. This will include elevating its customer and partner experiences; continuing to extend its leadership position in digital and mobile technologies; and unlocking new markets, channels and formats around the world.

"Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments," Schultz noted

The chief executive detailed the five-year growth plan during the Seattle-based company's biennial Investor Day on Dec. 4, one day before it debuted the Starbucks Reserve Roastery and Tasting Room in the Capitol Hill neighborhood of Seattle. The interactive Roastery and Tasting Room is dedicated to roasting, coffee education and increasing availability of the company’s small-lot Reserve coffees.

According to the coffee giant, the consolidation of small-batch roasting will allow the company to expand its Reserve coffee line to 1,500 locations globally, as well as open at least 100 stores designed to highlight these rare coffees exclusively, starting in Chicago, Los Angeles, New York, San Francisco and Washington, D.C. An additional Roastery is planned for Asia in 2016.

"This Roastery is the fulfillment of a decade-long dream — an homage to our relentless pursuit of coffee innovation that will create for our customers the most immersive, sensory demonstration of how we source, roast and craft the finest coffee from around the world," Schultz said. "Everything we’ve ever done has led us to this point. This is the moment of the next generation of Starbucks."

Starbucks is prepping changes in other areas, too. The company announced plans to double its U.S. food revenue to more than $4 billion over the next five years. By the end of fiscal year 2019, 20 to 25 percent of Starbucks stores in the United States will offer the Starbucks Evenings experience, adding approximately $1 billion in revenue. 

The expansion of Starbucks Evenings, Starbucks Reserve only stores, micro and express store formats, new drive-thrus and mobile trucks are just a few of the innovations customers will see beginning in 2015, the company said. In addition, Starbucks is upping the ante in mobile commerce with the launch of Mobile Order & Pay and plans for food and beverage delivery.

Starbucks introduced its fully integrated Mobile Order & Pay platform to customers in the Portland, Ore., area on Dec. 3. The platform allows customers to place orders in advance of their visit and pick up their ready order at their preferred Starbucks store. The Portland launch will be followed by a national rollout of Mobile Order & Pay in 2015.

"Of all the new traffic-driving initiatives for the company, Mobile Order & Pay is at the top of that list and we are confident that it will be game-changing for our customers and our business," said Adam Brotman, Starbucks' chief digital officer. "We have designed the full mobile ordering experience — from the app itself, to the pickup of the food and beverages, to the engagement with the baristas in our stores — to be a seamless and natural extension of the existing Starbucks Experience. We believe that the addition of Mobile Order & Pay into what is already one of the most widely used apps in the country will encourage customers to explore even more of our menu, will attract new customers to Starbucks, and will encourage incremental occasions to visit our stores."

The national rollout of Mobile Order & Pay will also lay the foundation for Starbucks' launch of food and beverage delivery in select metropolitan areas later in the year.

According to the company, the success of Starbucks mobile payment and loyalty programs will allow the company to bring to the table the constituent pieces necessary to build a consumer proposition for a mobile payment network with retailers outside of the Starbucks store footprint in fiscal year 2016. This platform — in which customers would earn Stars by using a stored value account, much as they do at Starbucks today  would create opportunities for other retailers to reward their most loyal customers, also benefiting Starbucks by creating incremental traffic opportunities.

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