Starbucks Plans To Expand Delivery Across the US and China

If fewer customers are coming to you, go to them. JL

Julie Jargon reports in the Wall Street Journal:

The coffee chain has been facing slowing traffic to its domestic coffee shops, began testing delivery with UberEats and will begin offering it next year. Delivery (has) added sales for chains that have seen traffic erode. Delivery has attracted customers who don’t come in. Starbucks is farther ahead on delivery in China since the chain joined with a delivery unit of Alibaba. The company says it has solved the challenges delivery poses  with splash-proof lids, delivery containers designed to keep drinks hot or cold and tamper-proof packaging seals. Dedicated drivers in China promise to deliver Starbucks coffee in 30 minutes
Starbucks plans to expand coffee delivery across the U.S. with UberEats as part of a broader strategy to try to reach more customers.
The coffee chain, which has been facing slowing traffic to its domestic coffee shops, on Thursday outlined its growth plans for investors gathered in New York.

Starbucks began testing delivery in Miami with UberEats in September and will begin offering it in nearly a quarter of its more than 8,000 U.S. company-operated stores early next year.
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.
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.
Starbucks is farther ahead on delivery in China, where the service has been expanded to more than 2,000 stores in 30 cities since the chain joined with a delivery unit of Alibaba Group Holding Ltd. The company says it has solved some of the challenges delivery poses in China with splash-proof lids, delivery containers designed to keep drinks hot or cold and tamper-proof packaging seals. Dedicated drivers in China promise to deliver Starbucks coffee in 30 minutes or less. The chain also is creating a virtual store that allows customers to use only one app to order gifts or products for themselves and have them delivered.
Starbucks has been working for more than a year to streamline its operations so it can focus on boosting customer traffic in the U.S. and China, its two key markets.
But it hasn’t been easy, and Starbucks on Thursday adjusted its outlook for long-term annual per-share earnings growth to at least 10%. In November 2017, it had reset its long-term annual EPS growth target to 12% or greater, down from a previous forecast of 15% to 20%.
Shares fell 4% in morning trading Friday. The company said it expects long-term consolidated revenue growth of 7% to 9%, in line with its previous target. Starbucks plans to grow same-store sales by 3% to 4% globally each year.
Starbucks has closed its Teavana mall stores, redeployed baristas’ duties, including having them clean after shops close, to allow them to focus more on customer service, and joined with Nestlé SA to market and sell much of its packaged coffee in supermarkets. Starbucks-branded products have been developed for use in Nestlé’s Nespresso and Dolce Gusto single-serve coffee machines.
The company last month said it would lay off approximately 5% of its global corporate workforce as it seeks to become more nimble and focused.
“We’re simplifying the business to accelerate the velocity of innovation,” Starbucks Chief Executive Kevin Johnson said in an interview Thursday.
The company is trying to develop more cold drinks, which now make up 50% of its beverage sales. The chain plans to have nitro cold brew on tap in all of its U.S. company-operated stores by the end of fiscal 2019.
Mr. Johnson pointed to the company’s fiscal fourth quarter, when the company posted progress in every operating metric it tracks globally, as proof that its moves are beginning to pay off.
However, sales growth in the U.S. beat expectations due to an increase in average ticket. Getting more customers in its doors remains a challenge, the company has said. The coffee market has become increasingly crowded in recent years, with new entrants on the high end and lower-cost rivals such as Dunkin’ Brands Group Inc. offering improved espresso-based drinks.
Activist investor William Ackman in October disclosed at 1.1% stake in Starbucks and has said he agrees with the changes Starbucks is making. Mr. Johnson declined to comment on the nature of any meetings he’s had with Mr. Ackman.