Starbucks Rewards to Pay Off in Grocery Stores, Teavana
The coffee chain is expanding its loyalty program so you can buy Starbucks all the time
Looks like Starbucks fans will be pulling out their Rewards cards in grocery stores and Teavana in the upcoming months; according to a report on the Annual Meeting of Shareholders, Starbucks is expanding its Rewards Stars program for Starbucks purchases in grocery stores and Teavana, starting in May.
According to the press release, Starbucks packaged coffee purchases at grocery stores and other purchases at Starbucks-owned stores like Teavana or Evolution Fresh will count towards My Starbucks Rewards Stars, meaning you could potentially get a free drink from kind of cheating on Starbucks with non-coffee orders.
In fact, starting in April, customers who use their Starbucks Card or Starbucks mobile app will be able to earn stars at Teavana, slowly solidifying Starbucks' dominance over the drink world. Add on the fact that more than 3 million Starbucks orders were paid with their mobile payments per week, and you've got at least 3 million more loyal Teavana fans.
What's different this time?
Boulange had 23 locations when Starbucks bought it, but it's fair to say the acquirer never wanted to grow it as a separate business -- the intent was to integrate its menu into that of Starbucks' namesake cafes. The same could be argued for Evolution Fresh -- its super-premium, cold-pressed juices never looked viable as the basis for their own chain, but they make a lot of sense as an option in Starbucks locations and in grocery stores.
Teavana was a different story. It successfully grew to nearly 400 locations, and its failure can largely be traced to the decline in mall traffic that has happened over the past few years. It simply made little sense for Starbucks to keep a second chain of stores open in malls where it already had one (or sometimes more) of its own locations.
Starbucks has already committed to make its new bakery brand the exclusive food partner for its Reserve and Roastery locations. Princi's have already opened inside the Shanghai Roastery and the first Reserve store at Starbucks' Seattle headquarters. Princi will also be part of the upcoming Roastery locations in Milan and New York.
Starbucks only plans a handful of Roastery locations around the world, but it may eventually open as many as 1,000 Reserve stores. It also plans to add Reserve bars to roughly 20% of its existing Starbucks locations. Princi is slated to be a part of that premium segment expansion, and while the company may open more bakeries under the Princi nameplate, that's not its core strategy for the brand.
Starbucks Products in Grocery Stores to Be Sold by Nestle After $7.15 Billion Deal
Published May 7, 2018 &bull Updated on May 7, 2018 at 11:15 am
What to Know
- The all-cash deal would give Nestle the right to sell packaged coffee and tea in stores and use the brand on single-serve capsules
- Starbucks ice coffees and Frappuccinos aren't part of the deal, however
- Nestle hinted last year it was looking to focus on coffee and other areas, and sold its U.S. candy business to Italy's Ferrero
Nestle is paying more than $7 billion to handle global retail sales of Starbucks's coffee and tea outside of its coffee shops.
The deal comes with a huge price tag for Nestle, but it could pay off big for the Swiss company. Its Nescafe and Nespresso don't carry anywhere near the heft in America that Starbucks brand does, with its $2 billion in annual sales.
The deal gives Nestle the rights to market, sell and distribute Starbucks, Seattle's Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia packaged coffee and tea. It will also be able to put the Starbucks brand on Nestle single-serve capsules. The agreement excludes bottled drinks like ice coffees and Frappuccinos that are sold in and outside of Starbucks stores.
Nestle had hinted last year that it was looking at focusing on higher-growth areas like pet care, coffee and infant nutrition. In January it announced it was selling its U.S. candy business to Italy's Ferrero for approximately $2.8 billion.
With the strength of the Starbucks brand, Nestle will be able to better compete against JAB Holdings, an investment holding company that has gobbled up businesses and brands associated with Peet's Coffee & Tea, Caribou Coffee Co., Stumptown Coffee and Krispy Kreme Doughnuts.
Nestle announced Monday that Starbucks Corp. will receive $7.15 billion in an up-front cash payment. Approximately 500 Starbucks employees will join Nestle, and operations will continue to be located in Seattle.
Starbucks (SBUX) Moving Outside Of Cafes And Into Grocery Aisles
It isn’t exactly big news when Starbucks Corporation (NASDAQ:SBUX) announces an expansion. The coffeehouse chain, with more than 13,000 U.S. stores, has become so ubiquitous that its stores are sometimes less than a block apart. The farthest an American in the Lower 48 can get from a Starbucks is in the middle of Grand Teton National Park in Wyoming, according to data compiled by an enterprising doctoral candidate from the University of Washington, and even then, a pumpkin spice latte is just 140 miles away.
With its storefront markets nearing the saturation point, the obvious question is: Where can a hungry giant find new sources of sustenance? The answer: at alternative sites, some of which are innovative – ski-through kiosks, and a Swiss passenger train – and some of which are decidedly mundane. A year ago, Starbucks opened a location inside a storage container in Tukwila, Wash., and in California’s Squaw Valley, customers craving a latte can use a convenient ski-thru location. The company is also expanding into Asia, where 700 of its 1,500 planned new stores will open this year, and Europe, where a Starbucks train carries passengers from the Geneva airport to St. Gallen, Switzerland. In keeping with the innovative approach, the company last year launched new pastry and juice lines and acquired specialty tea retailer Teavana.
But Starbucks’ main focus is on an old standby not known for trendiness or atmosphere: Grocery store shelves. There, Starbucks is trading wifi and folk music and all things mocha grande for fluorescent lights, shopping carts and… direct competition. In doing so, Starbucks has introduced two new variables into its model: It has ceded control of merchandising to second and even third parties, and has opened itself to competition from other brands that are now only an inches away.
Back in 2011, CEO Howard Schultz proclaimed a long-term goal when he told German magazine Der Spiegel, “We’re going to build a major multibillion-dollar business in the grocery industry”. The company has always sold bagged coffee in its cafes, but taking the brand to grocery aisles was a new step, offering the potential to reach an untapped market of customers who might not be willing to pay $4 for an aggressively fru-fru cup of coffee at a retail location.
On Jan. 15, the company introduced a new line of Seattle’s Best instant coffee and latte mixes into its product lineup.
This wouldn’t have been possible had Starbucks still been in a partnership with Kraft Foods Group Inc. (NASDAQ:KRFT). Since 1998, Kraft had agreed to distribute Starbucks brands, which had included Seattle’s Best coffee which they acquired in 2004.
In 2010, when the business was generating nearly $400 million in annual sales, Starbucks attempted to buy its way out of the agreement. Kraft rejected the attempt, but a few months later Starbucks terminated the agreement altogether.
In November an arbitrator ruled that Starbucks owed Kraft $2.8 billion for the breach.
On a conference call, CEO Howard Schultz called the breakup with Kraft over Seattle’s Best “without question, the right decision for Starbucks, our brand, and our shareholders.”
Starbucks’ chief financial officer, Troy Alstead, said in November at the Morgan Stanley Global Consumer Conference that the company’s executives have “strategically set our sights on all of that consumption of our core products of coffee and tea… and the coffeehouse experience outside of the store.” He added that the grocery market represents “a huge amount of global consumption and [it’s] where we’ve always been underrepresented and under-shared.” Alstead also announced that Starbucks had gained a 30 percent share of the U.S. at-home coffee market, thanks to their single-serving coffee-maker products.
In fact, Starbucks coffee has been in grocery stores since 1998, when the company signed a deal with Kraft to distribute their Seattle’s Best brand, but it has never been a big part of the company’s U.S. revenues. Even in 2007, grocery store sales accounted for just three percent of Starbucks’ total revenues, and 23 percent of its “specialty” segment, which also includes foodservice. In fiscal year 2013, the same sales were worth nearly three quarters of the same segment.
The increases come amid intense competition and record decreases in coffee prices. In January, the price of Arabica dipped to $1.19 per pound, down from a record-high of $1.90 in 2011. Cafe prices rarely hinge on these numbers because a latte depends on more than beans.
But the lower prices helped the company compete with low-cost brands in the grocery aisle. Though all packaged coffee prices dropped, customers who once reached for the J.M. Smucker Company (NYSE:SJM)’s Dunkin’ Donuts and Folgers Brand coffee could now afford Starbucks for a similar price. This meant a jump for profits in the grocery sector.
Operating margins for bagged coffee jumped 4.5 percentage points in the fourth quarter of 2013 “primarily due to lower coffee costs and sales leverage,” according to Starbucks’ October earnings report. This report puts the United States in the “Americas” category – where operating income jumped 17.1 percent last year, thanks in part to the grocery sales.
These inroads pale in comparison with the latest iteration of the original Starbucks storefront expansion model, in Asia, where operating revenues jumped 27.2 percent in the same period. There, Starbucks is pursuing the same strategies that worked so well at home in the 1990s.
“China is set to be their second-biggest market pretty quickly,” observed Will Slabaugh of Stephens Inc. research analysts.
But because Asia, like North America, will eventually reach storefront saturation, the company has further incentive to develop off-site markets. Added to that, reception has been lukewarm to the company’s expansion into Europe, where Starbucks closed 72 “underperforming” stores last year. “Europe has always been the one region that’s gotten the least amount of traction,” Wedbush Securities analyst Nick Setyan said.
As the company’s marketing strategy evolves, taking the coffeehouse experience home – where, ironically most people were drinking coffee before Starbucks took the coffeehouse concept mainstream, may provide the best prospects for long-term gains. If so, Starbucks will basically be making an old tradition new again.
Starbucks to close all Teavana stores
SEATTLE — Focusing on its core coffee-shop business, Starbucks on Thursday said it will close its Teavana stores, even as it takes full ownership of all Starbucks stores in China in that rapidly expanding market.
The company is closing all 379 Teavana retail stores, saying that they're struggling and would likely continue doing so. Many of those stores are located in malls, where traffic has been declining.
The stores will close over the coming year, with most closing by spring 2018. The 3,300 employees affected can apply for positions at Starbucks stores.
The company will continue to sell Teavana drinks in its Starbucks stores as well as bottled Teavana beverages in grocery stores.
The moves came as Starbucks announced third-quarter earnings results that fell below Wall Street expectations for revenue and comparable sales growth. It met Wall Street expectations for earnings.
Earlier Thursday, the company said it is spending $1.3 billion to purchase the remaining 50 percent of its joint venture business in China — the single largest acquisition in company history.
The move means Starbucks will assume 100 percent ownership of about 1,300 stores in east China — spanning Shanghai and Jiangsu and Zhejiang Provinces — in the country that represents the company's fastest-growing market, in terms of store count, outside of the U.S., the company said.
Starbucks currently has 2,800 stores in China. Aside from the 1,300 stores in east China, the remaining 1,500 are already fully company-owned. Future stores opening in the country will be as well, the company said. Starbucks plans to be operating 5,000 stores in China by 2021.
Starbucks' sales in China have been growing rapidly. In recent quarters, sales in stores there open at least a year grew 6 to 7 percent, versus 3 percent in the U.S.
"Starbucks' growth potential in China is unparalleled," Kevin Johnson, CEO and president, said during a phone interview Thursday. He cited the market's ability to sustain a large number of stores, long-term growth potential, return on invested capital and confidence in management team there.
Starbucks will be acquiring the 50 percent interest from joint venture partners President Chain Store Corporation and Uni-President Enterprises Corporation.
At the same time, those joint venture partners will be acquiring Starbucks' 50 percent interest in its Taiwan business, assuming 100 percent ownership of Starbucks' operations there. That means the 410 Starbucks stores in Taiwan will be fully licensed, rather than joint ventures.
The move is similar to the company's 2011 decision to fully license its Hong Kong and Macau operations, Johnson said in a statement.
Both transactions are expected to close by early 2018.
Sales growth in China, as well as the U.S., helped account for an 8 percent rise in revenue in the third quarter, compared to the same quarter last year.
Same-store sales — sales at stores open at least a year — showed heartening growth as well, especially compared to the previous two quarters. In the U.S., such sales increased 5 percent, driven largely by an increase in how much an average customer spends. That's compared to 3 percent growth the past two quarters.
Johnson attributed part of the growth to innovations in food and beverage offerings, such as sous vide egg bites and more lunchtime offerings.
The company has been focusing on lunchtime as an opportunity to sell more food. It has been testing a "Mercato" menu, featuring grab-and-go salads and sandwiches made fresh daily, at its Chicago stores. It will roll out the Mercato menu in the greater Seattle area in early August, Johnson said.
Same-store sales in China grew 7 percent, about the same as the previous two quarters.
Globally, same-store sales grew 4 percent, which came in below analysts' consensus estimate of 4.8 percent growth, according to Consensus Metrix. Such sales also came in below analysts' expectations for the Americas region (5 percent growth versus analysts' expectations of 5.2 percent) and China and Asia Pacific region (1 percent growth versus 4.3 percent expected).
The company continued its digital growth, with Rewards membership up 8 percent year-over-year to 13.3 million active members. Sales to such members represented 36 percent of sales at U.S. company-operated stores.
Sales via mobile order-and-pay increased to 9 percent of transactions at U.S. company-operated stores. The company plans to allow non-Rewards customers to use mobile order-and-pay starting next year, Johnson said. He added that the company has made changes in its stores to help ease the congestion created by people waiting to pick up their mobile orders.
Overall, the company logged $5.66 billion for the quarter ended July 2. That's up 8 percent from a year ago but still fell short of Wall Street analysts' expectations of $5.75 billion, according to a Reuters consensus estimate.
Earnings per share were 47 cents, which included an impairment charge largely related to the closure of the Teavana stores. Without that item, earnings per share were 55 cents, which met Wall Street expectations.
Disney Movie Rewards
Disney Movie Rewards is an online program that rewards you for purchasing Disney movies and seeing them in the theater. This program also occasionally releases free codes good for points.
How it Works:
Sign up for an account and any time you buy a Disney movie, you’ll find a code on the inside of the package to enter. You can also take a digital picture of ticket stubs to receive even more points.
Tips & Tricks:
Each month you should receive an “Mystery” Code as a part of the either email (it’s always at the bottom left hand corner so sometimes it’s easy to miss. On the Disney Movie Rewards Facebook page, codes are released on a regular basis. Don’t forge to keep ticket stubs, too. It’s a simple way to earn more points. My favorite reward is the Starbucks Gift card which you then register and use to earn more rewards at Starbucks, of course.
Details: Join Starbucks Rewards and earn free food and drinks.
New Starbucks Happy Hour on Select Thursdays
Details: The Starbucks Happy Hour is available on select Thursdays each month from 2 p.m. to 7 p.m. Best of all, the offer will be for a buy-one-get-one FREE on ANY handcrafted drink — grande or larger. The deal is for Rewards members only and will be found on the App.
Free Birthday Drink with My Starbucks Rewards
Details: Add more perks to your daily routine with a Starbucks Rewards Card. Simply pay with a registered Starbucks Card, mobile app or by entering Star codes from specifically marked Starbucks products in grocery stores. Redeem for free or discounted items.
Starbucks eGift Card
Details: Choose a design and personalize your message!
Save 10 Cents on every beverage
Details: Whenever you bring in your own reusable cup, mug or travel tumbler or purchase a Starbucks plastic reusable travel cup for $2 to enjoy the same savings.
Exclusions: At participating locations.
New Strawberry Funnel Cake Frappuccino
Free Puppuccino Puppy Whip
Details: If you are heading to Starbucks or through the drive-through with your furry friend in tow, consider ordering them a free “Puppuccino Puppy Whip” which consists of a small cup of whipped cream. They’ll love you for it!
Have a Crispy Grilled Cheese Sandwich
Details: A three-cheese blend melted between buttery, toasted sourdough bread. joins the permanent menu.
Unlimited Refills Hot or Iced Coffee and Hot or Iced Tea for Rewards Members
Details: Starbucks Rewards Members can score FREE refills of brewed coffee (iced or hot!), Cold Brew or iced or hot tea with any beverage purchase. Sign up for free at this link.
New Starbucks Rewards Program
Details: Starbucks Rewards Members will now earn 2 stars for every $1 spent using a registered gift card or the Starbucks app and you can now redeem your points at different levels for various items! Here’s the scoop: Redeem 25 Stars – Add an extra shot, flavor, or soy milk to your drink for free (up to $1 off beverage price) Redeem 50 Stars – Get any size hot brewed coffee, hot tea, or bakery item for free Redeem 150 Stars – Get any handcrafted beverage, parfait or breakfast item for free Redeem 200 Stars – Get a lunch sandwich, salad or protein box for free Redeem 400 Stars – Get packaged coffee or a single merchandise item for free (up to $20 value). All other Starbucks Rewards items like free in-store brewed coffee or tea refills, and birthday freebies are still available.
The Starbucks Consumer Products Group Passport.
Years ago, there was a Starbucks CPG passport! A reader (a Starbucks partner) sent me this photo of her old CPG passport! I like this idea. And now, the number of CPG items in the grocery store is huge! For those who don’t know, CPG standard for “Consumer Products Group.” It’s the area of the business that involves pre-packaged items, usually found in grocery stores, but could be sold in many different places, including the actual retail stores.
On Saturday, July 20th, I walked through a QFC grocery store in Seattle’s University Village neighborhood, and took pictures of all the many Starbucks CPG items. There are so many now that it is pretty impressive. I think a lot of people don’t realize the variety of Starbucks-produced items at the local grocery! Because of the large variety of grocery items, this is precisely the reason I think Starbucks is due for a new CPG passport (and I would like a customer version too, please).
Of course, first and foremost, there are bottled Frappuccinos!
Starbucks first introduced the bottled Frappuccino in 1995, after the failure of an earlier (and very first ever) CPG product called Mazagran.
You can also find Starbucks ice cream at the grocery store:
Starbucks ice cream is being discontinued! According to the 1997 Starbucks Annual Report, Starbucks began offering ice cream in 1996. That’s a lot of years of Starbucks ice cream. I hate to say this, I am not that crazy about Starbucks ice cream. It doesn’t taste all that great to me, so seeing it go is no love loss. Starbucks ice cream has gone through many recipe changes and went from being produced by Dreyer’s to being produced by UniLever. Good bye Starbucks ice cream.
You can buy ready-to drink Starbucks Refreshers:
Canned Refreshers began showing up in grocery stores in early 2012. I like these! These are indeed refreshing!
Starbucks Discoveries are now available at the grocery store – there is a mocha, vanilla, and a caramel macchiato flavor:
I’m not a huge fan of these either. I’ll pass on these too.
You can find a variety of Starbucks whole bean coffee too, And a variety of Via Ready Brew offerings. As to the whole bean coffee, your local grocery store is usually the only place that you’ll find a “core” (meaning that it’s always offered) Starbucks single-origin Colombia coffee – I highly recommend that you pick up the Colombia coffee:
As to the Refreshers Vias, at the grocery store, you’ll usually find Cool Lime, Very Berry Hibiscus, and Strawberry Lemonade. The Strawberry Lemonade Via is delicious! You must try these!
You can find Evolution Fresh juice, cartons of Tazo chai concentrate (including decaf chai), and of course you can find Seattle’s Best Coffee too!
There is still more at the local grocery store! There are a variety of Starbucks K-cup pods, including Tazo tea pods for the Keurig single serve machine:
And, there are a variety Tazo teas in filter bags:
Starbucks recently launched a bottled iced coffee. I do like the iced coffees – they’re pretty good. There’s more – Starbucks double shot drinks in cans. I’ve always thought that the idea of espresso in a can is a little weird, but they seem to be very popular.
Hope you enjoyed this walk through my grocery store with me! What do you think? How about a Starbucks CPG passport for both customers and partners? Which one is your favorite? What would you want to see in the grocery store?
Starbucks to Pay Kraft $2.75 Billion, Ending Broken-Deal Dispute
Starbucks said on Tuesday that it would pay Kraft Foods $2.75 billion, ending a long-running spat over an agreement the two food titans had for distribution of Starbucks packaged coffee in grocery stores.
The payment was ordered by an arbitrator. The arbitration centered on the way Starbucks broke off its long-term relationship with Kraft three years ago over Kraft’s objections.
Starbucks said it would use some of the $3.2 billion it had on hand and its available borrowing capacity to pay Kraft. The company will book the payment as an operating expense, which will be reflected in fiscal year 2013, which ended in October.
Mondelez, a vast snack and confectionary company that was spun off from Kraft in 2012, will receive the payments from Starbucks as part of the spinoff agreement. Mondelez said it was pleased that the arbitrator had concurred that Starbucks had breached its contract with Kraft.
“We’re glad to put this issue behind us,” Gerd Pleuhs, general counsel of Mondelez, said in a statement. “We can now fully focus on growing our global snacks business.”
Mondelez plans to use the proceeds to buy back its Class A shares, subject to approval by its board. The money will be added to the $6 billion the company has allocated for share repurchases.
Kraft started selling Starbucks packaged ground and whole beans through grocery outlets in 1998. Such sales amounted to about $500 million in 2010. In August of that year, Starbucks offered Kraft $750 million to terminate the agreement, which led to the legal fight that just ended.
Sales of coffee in single-serve coffee pods were starting to boom at that time. The agreement with Kraft, however, limited Starbucks to selling pods of a kind that worked only in Kraft’s Tassimo machines. At the same time, Green Mountain Coffee was almost single-handedly increasing sales in that part of the market with its Keurig system, which used K-Cup packs, leaving Starbucks in danger of losing momentum in a booming business.
Since it pulled the plug on Kraft, Starbucks has sold more than a billion K-Cup packs, and its market share of such single-serving pods has grown 18.4 percent.
In a statement, Starbucks said it was pleased that the arbitration had ended, although it disagreed with the decision.
“We believe Kraft did not deliver on its responsibilities to our brand under the agreement, the performance of the business suffered as a result, and that we had a right to terminate the agreement without payment to Kraft,” it added. What Starbucks calls its “channel development” business, which includes the ground and whole beans formerly sold under its agreement with Kraft, as well as bottled frappucinos, single-serving packages and other products sold through grocery stores, had revenue of $1.4 billion in fiscal 2013.
The number of coffee products Starbucks sells through such outlets has grown to 53 from 39 over the last two years, thanks in large part to surging K-Cup sales and new products like Starbucks Discoveries, coffee drinks sold in the dairy section of stores.
Profit for Starbucks on such products grew 47 percent over the last two years, in part because the company has not had to share sales with Kraft.
“The results over the past two and a half years clearly demonstrate that Starbucks at-home coffee portfolio is significantly healthier than it was before we assumed direct control from Kraft,” Starbucks said in its statement.
Nestle pays $7B to sell Starbucks coffee in grocery aisle
Nestle is paying more than $7 billion to buy the rights to sell Starbucks coffee and tea in supermarkets and other stores outside its coffee shops.
SEATTLE — Nestle is paying more than $7 billion to buy the rights to sell Starbucks coffee and tea in supermarkets and other stores outside its coffee shops.
The deal comes with a huge price tag for Nestle, but it could pay off big for the Swiss company. Its Nescafe and Nespresso don’t carry anywhere near the heft in America that the Starbucks brand does, with its $2 billion in annual sales. Nestle will also put Starbucks in grocery stores outside the U.S. and Canada.
The deal gives Nestle the rights to market, sell and distribute bags of Starbucks coffee beans, as well as its instant coffee. Nestle will also sell other brands owned by Starbucks, such as Seattle’s Best Coffee, Teavana tea and Torrefazione Italia coffee, and will be allowed to put the Starbucks brand on Nestle single-serve capsules for coffee machines.
The agreement does not include bottled drinks like iced coffees and Frappuccinos that are sold in and outside of Starbucks stores.
Nestle hinted last year that it was looking at focusing on higher-growth areas like pet care, coffee and infant nutrition. In January it announced it was selling its U.S. candy business to Italy’s Ferrero for approximately $2.8 billion. And last year, Nestle bought a majority stake in high-end coffee company Blue Bottle.
With the strength of the Starbucks brand, Nestle will be able to better compete against JAB Holdings, an investment holding company that has gobbled up coffee businesses and brands associated with Peet’s, Caribou, Stumptown and Krispy Kreme Doughnuts.
Starbucks already has a deal with JAB, creating single-serve coffee for its Keurig brewers. Starbucks CEO Kevin Johnson said that deal is unaffected by the agreement with Nestle.
Nestle announced Monday that Starbucks Corp. will receive $7.15 billion in an up-front cash payment. Approximately 500 Starbucks employees will join Nestle, and operations will continue to be located in Seattle.
The deal is subject to regulatory approval and is expected to close by the end of the year.