Starbucks has revealed it is “leaning in” to offering more plant-based food and beverages in a bid to appeal to new customers amid disappointing fourth quarter sales.
The US coffee giant reported its fourth quarter earnings yesterday (2 November), with net revenue coming in at $5.7bn – below analysts’ estimate of $5.8bn. Meanwhile, total comparable sales rose 2% for the quarter, short of the estimate of 3.2% and compared to 4% last year.
Sales for Europe and the Middle East were more encouraging for the quarter, delivering revenue growth of 7% to $270m, its strongest quarterly revenue growth in over three years.
During an analyst call, the brand’s CEO Kevin Johnson spoke about Starbucks’ plans to drive further innovation in food and beverage. So far, it has already focused on new tea and coffee formats such as iced espresso and Teavana shaken iced teas.
It is also looking to tap into growing trends such as veganism and consumer demand for plant-based beverages and alternatives. Starbucks’ food programme accounted for 21% of sales in the fourth quarter of this year, with Johnson confident it will reach its target of 25% by 2021.
“We are leaning into our fast growing categories around Cold Brew, Draft Nitro beverages, and plant-based modifiers, including almond, coconut, and soy milk alternatives,” he said.
“Not only are these fast growing platforms highly relevant to our customers, our research demonstrates that they also provide a significant opportunity to drive [sales] outside of our core morning sales window.”
Acquiring digital relationships
Starbucks is also looking to create more digital relationships with consumers, primarily through its Starbucks Rewards membership programme and Mobile Order & Pay app.
For the full year of 2017, Starbucks Rewards membership in the US rose 11% year-over-year, while spend for each member increased 8% in the fourth quarter. It is now looking to offer consumers the chance to pay through the app – even if they aren’t a Starbucks Rewards member.
“Having made measurable progress increasing throughput and customer experience at peak, we can soon begin offering Mobile Order & Pay capabilities and features to all customers, Starbucks Rewards member or not. In quarters ahead, all customers will be able to download our app, set up a digital relationship with Starbucks, select a payment vehicle of their choice, and use Mobile Order & Pay,” Johnson added.
In the US, Starbucks ended the quarter with 11% of sales coming from its Mobile Order & Pay app, with the brand planning to ramp up its marketing to encourage more customers to sign up.
Matthew Ryan, global chief strategy officer at Starbucks, concluded: “It’s important to recognise that we had turned off marketing for Mobile Order & Pay for a good while because we were focused on getting the operations right. It was just toward the end of the quarter that we were able to turn it back on, hence the acceleration up to 11%, so we’re very optimistic about Mobile Order & Pay.”