Starbucks sees future sales growth fueled by food, cold coffee beverages

Starbucks goes upscale with $10 coffee

Starbucks sees food innovation and its cold coffee beverages as key areas fueling its future growth.

At present, food is about 20 percent of company's retail sales in the U.S.

"Food represents the biggest growth opportunity for our business," Sharon Rothstein, Starbucks global chief marketing officer, said at the coffee chain's investor day event in New York. She said the company plans to double the food business over the next five years by offering not just snacks but meals throughout the day.

Breakfast sandwich category sales at Starbucks have nearly doubled over the past four years and now account for close to about 40 percent of total food sales.

Starting in January, the retailer plans to launch Sous Vide Egg Bites, a new handheld product line in the breakfast meal category that will be protein rich, wheat-free and address "health and wellness demand." It will follow it up in the spring with a gluten-free breakfast sandwich.

Rothstein said the company also sees "a big business opportunity" in the lunch crowd. As a result, the chain plans to offer new "grab and go" meals as well as regional offerings of soups.

Meanwhile, cold coffee beverages are expected to grow to nearly half of its beverage revenue in the next five years.

"We are relentlessly focused to innovate in all things cold coffee," Rothstein said. "And that starts with Cold Brew."

The Seattle-based coffee chain forecasts that by the year 2021 nearly 50 percent of its beverage mix will be in cold, up from over 35 percent in 2013. Helping to drive growth are new offerings in the cold beverage category such as Cold Brew.

The Cold Brew platform is part of Starbucks' overall strategy to deliver improved revenue and profitability through premium offerings. Earlier this year, the company also launched Nitro Cold Brew, which is now available in more than 500 U.S. stores as well as some locations in China and Canada.

At Wednesday's investor event, management indicated that the Cold Brew platform has already contributed in a meaningful way to same-store sales growth.

"[Cold Brew] is another example of premiumization at play as customers have traded up from their iced coffee habits to Cold Brew," said Rothstein. "In less than a year and a half, Cold Brew has really become big business for us."

Cold Brew, an extra-strong brewed coffee, can cost as much as 20 percent more than the retailer's regular iced coffee offering.

At present, Cold Brew is a roughly $140 million coffee platform in the U.S. market alone. Starbucks expects to more than quadruple its Cold Brew business by 2021.

Starbucks also is about to launch a new line of bottled Teavana Craft Iced Teas in a partnership with Anheuser-Busch InBev. Four fruit-flavored iced tea varieties will be introduced in a category that Starbucks says is a $4 billion market potential.

The new Teavana bottled iced teas will be available in the U.S. Northeast region starting in February and will expand across the rest of the nation by 2018. The company said each tea product will be under 100 calories and will contain no artificial ingredients.

Meantime, the company sees the premium Roastery stores as an important contributor to future growth. The first Roastery opened two years ago in Seattle and the company plans to further expand the concept in the U.S., Europe as well as in Asian markets such as Japan and China.

"[Roastery] serves as a really unique laboratory for experimentation and exploration," Rothstein said. "We have the ability to test, learn and then quickly scale our new customer favorites to all our Starbucks stores."

Starbucks also disclosed plans at the event to add 12,000 new stores globally over the next five years. That would represent a nearly 50 percent increase from the current number and bring the chain to a total of about 37,000 stores.

In trading Wednesday, Starbucks shares closed down just over 2 percent.