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Starbucks to open 1,500 new US stores by 2017

Starbucks has ambitious expansion plans in the United States, aiming to open 1,500 new cafes over the next five years. Starbucks is also planning to expand overseas, particularly in China.

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David Goldman/AP/File
In this 2011 file photo, pedestrians are reflected outside a Starbucks store in Atlanta. Starbucks is planning to add at least 1,500 cafes in the U.S. over the next five years. Taking into account Canada and South America, the world's largest coffee company plans to add a total of 3,000 new cafes in its broader Americas region.

础苍辞迟丑别谤听Starbucks聽may soon pop up around the corner, with the world's biggest coffee company planning to add at least 1,500 cafes in the U.S. over the next five years.

Starbucks聽said Wednesday that it plans to boost the number of locations in its biggest market by about 13 percent by 2017. In the broader Americas region, the company plans to add a total of 3,000 new cafes by that time.

Starbucks聽also is planning to expand overseas, particularly in China, which is expected to surpass Canada as聽Starbucks' second-biggest market in the next two years. By that time,聽Starbucks聽says it will have 20,000 stores globally, up from about 18,000.

The upbeat expansion plans mark a turnaround from聽Starbucks' struggles during the recession. After hitting a rough patch, the company brought back founder Howard Schultz as CEO in 2008 and embarked on a massive restructuring effort that included closing 10 percent of its U.S. stores.

Cliff Burrows, who heads聽Starbucks' domestic business, said the problem wasn't that聽Starbucks聽was oversaturated, but that the company hadn't been careful about its store openings. In the years leading up to the downturn, the company was opening well over 1,000 stores a year. That led to cafes in locations where signs or traffic might not be optimal, he said.

Burrows said聽Starbucks聽has gotten more sophisticated, and noted that the cafes opened in recent years are among the company's best performers. Sales at new cafes are averaging about $1 million a year, for example, above the company's target of $900,000. It costs about $450,000 to build a new cafe.

Since聽Starbucks聽already has a broad footprint, the company's expansion is intended to "deepen" its presence with additional stores in markets across the U.S., said Troy Alstead,聽Starbucks' chief financial officer. That means establishing stores 鈥 including drive-thrus and smaller cafes 鈥 in more convenient locations for customers. And even as it expands,聽Starbucks聽said it expects to maintain growth at cafes open at least a year. The figure, a key metric of health, has ranged between 7 percent and 8 percent globally in the past three years.

The continued U.S. sales growth will be fueled by the new products, such as Evolution premium juices and Via single-serve coffee packets. Looking forward,聽Starbucks聽is also looking to improve its food menu and is testing a new menu of baked goods from La Boulange, a small San Francisco-based chain it acquired earlier this year. The new croissants, loaf cakes and other items will spread to about 2,500 cafes next year and go national sometime in 2014, Burrows said. The company says only about a third of customers currently buy food with their drinks.

In a test aimed at building sales in the evening hours, the company also started serving beer and wine at about a dozen locations earlier this year, with food such as chicken skewers and dates wrapped in bacon.

And most recently,聽Starbucks聽announced plans to acquire Teavana, a chain that has 300 locations in shopping malls. When the announcement was made last month, Schultz said the company would "do for tea what it did for coffee."

That includes plans to expand Teavana's presence beyond the shopping mall with stand-alone shops that have "tea bars" that serve specialty drinks. The company declined to say when聽Starbucks聽cafes would begin serving Teavana drinks 鈥 and it hasn't decided on whether it will continue to sell Tazo in cafes.

After a string of acquisitions in recent years to build on its core business, Schultz indicated Wednesday that the company would hold off on any additional purchases in the near future, noting that the company has "enough to handle."

To build its packaged-goods business,聽Starbucks聽plans to let customers earn points on their My聽Starbucks聽loyalty card starting next year when they purchase聽Starbucks聽bagged coffees in supermarkets and other outlets. Customers currently earn points only when they make purchases in聽Starbucks聽stores.

The picture isn't rosy around the globe, however. Europe remains a sore spot for聽Starbucks, with a key sales figure falling in the region 1 percent during the latest quarter. In an effort to boost results, the company has been closing underperforming stores and licensing of some of its cafes in the region.

In the United Kingdom,聽Starbucks聽is also embroiled in a row over its taxes. The company has been doing business in Britain for 15 years and has 700 outlets but it has yet to record a profit 鈥 and therefore pay any taxes.

Starbucks聽says this is due to a complex process where its taxable profits in the U.K. are calculated after royalties paid to its European headquarters in the Netherlands have been deducted.

Following criticism in the U.K. parliament and a campaign by protest group U.K. Uncut,聽Starbucks聽said this week that it was reviewing its tax approach.

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