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Starbucks wants a bite of lunch, while rivals watch and worry

  • Starbucks plans to double its food business by 2021.
  • Some see Starbucks' newfound seriousness about lunch as yet another noontime encroachment by a non-traditional player.
  • Starbucks' play for lunch launched in April at more than 100 locations in the Chicago area and expanded to another 200 of its stores around Seattle last month.
Starbucks Mobile Order & Pay app
Source: Starbucks

Starbucks rules the coffee business. Now, it also wants to be known for its sushi burrito.

Having satisfied customers' morning caffeine cravings, the Seattle-based company has set its sights on lunch.

"We do see lunch as the biggest opportunity," said Sara Trilling, Starbucks' senior vice president of food category and innovation.

To take advantage of it, Starbucks has a new, expanded menu called Mercato -- Italian for "market" -- that includes avocado salads, herbed chicken and fig-spread sandwiches. In yet another play for Starbuck's core yuppie following, there's even a "farmers' market protein box," which has Genoa salami, cheddar cheese, snap peas, sliced apples, crackers and almonds.

The play for lunch launched in April at more than 100 locations in the Chicago area and expanded to another 200 of its stores around Seattle last month.

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Trilling said Starbucks plans to double its food business by 2021.

That's not exactly meteoric growth, but at least, it gives Starbucks a fighting chance after the morning coffee rush. Half of Starbucks customers in the United States come in before 11 a.m. The challenge is getting them to try a sushi burrito -- a chicken-and-rice concoction wrapped in a seaweed leaf that's available in Chicago -- or a seared steak and cheddar sandwich.

"From a growth perspective, you've got to expand the number of transactions," said David Henkes, senior principal for Technomics, a Chicago-based food industry consulting firm. "They're extremely busy during the breakfast (hours), lines out the door. Come 11 a.m., they're empty."

The thought of a giant like Starbucks moving in the lunch hour may sound threatening, but some rivals shrug.

"I don't wake up at night... particularly worried about any one competitor of any kind," said Ron Shaich, CEO of Panera Bread, the big sandwich, soups and salad chain. "I can't tell you how many people along the way I've heard were doing this or that. We don't spend a lot of time reacting."

Others see Starbucks' newfound seriousness about lunch as yet another noontime encroachment by a non-traditional player.

For example, the head of Moe's Southwest Grill, which depends on solid lunch and dinner sales at its 700 locations, talks about how grocery stores have moved into prepared foods and deli offerings, not to mention diners who run to convenience stores for a quick bite.

Now comes Starbucks, a "cafe player," said Moe's President Bruce Schroder. "Starbucks is just another example of how the competitive landscape has changed," he added.

The Starbucks lunch strategy may not be a home run. The chain is limited by not having the grills and extensive kitchens that allow that allow rivals to deliver fresh hot food quickly to customers. Instead,food is prepared at central hubs and then trucked to its stores.

As such, meals can't be customized like at some quick-service restaurants where customers might ask for grillmasters to hold the onions or add extra ketchup to their burgers. And that's what's popular these days, especially with younger customers.

"Millennials want high-touch service. They want to get it their way," said Kevin Burke, managing partner of Trinity Capital, a Los Angeles-based investment banking firm.

Still, with a lunch menu broad enough to lure customers, Starbucks should be able to capitalize on its brand loyalty and make a go of it, he said. For now, that's enough.

"To try to thicken their traffic between 11 and 2 is a brilliant move," Burke said. But "you're not going to dinner there."