Starbucks sees even more stores in its future

Discussion
Photo: Starbucks
Dec 15, 2020
Matthew Stern

Starbucks plans to open a whopping 22,000 locations to bring its massive store count to 55,000 by 2030.

At its bi-annual Investor Day, Rosalind Brewer, COO and group president-Americas, projected Starbucks’ U.S. base would expand by “nearly 800 gross stores each year.” She told investors, “Though we are growing off a large base, there is ample room to expand in regions where the Starbucks brand is less penetrated with particular focus on high-volume, high-margin suburban drive-thrus.”

Starbucks plans to accelerate its new format expansion, like pickup and curbside, projecting that it will expand drive-thru to nearly 45 percent of its U.S. portfolio by 2023, up almost 10 percent from fiscal 2020. Pre-COVID, roughly 80 percent of sales were to-go.

Starbucks opened its first Pickup location just over a year ago and will likewise speed up the expansion of the smaller format. People who work and live in cities as well as those working from home are found to be seeking branches closer to their home. Ms. Brewer said, “As we introduce more efficient formats, we’re reducing the long lines that can sometimes occur in metro locations, unlocking more sales. And since these are smaller stores, without seating areas, this enhances our fixed cost profile, which further contributes to improved margin.”

Same-store sales globally were down 9 percent in the fiscal fourth quarter ended September 27. Drastically fewer customers were picking up their coffee on the way to the office or working from coffee shops, although sales at suburban locations and drive-thru restaurants grew, according to CNN Business.

Starbucks sees even more stores in its future
Photo: Starbucks

At Investor Day, Kevin Johnson, CEO, said Starbucks will benefit from an acceleration in changes in consumer behavior due to the pandemic, including the increasing appeal for more “convenient on-demand experiences with curated options” and consistent experiences, as well greater attention placed on sustainability and values.

He also noted that former U.S. Surgeon General, Vivek Murthy, recently described the pandemic as creating a “social recession,” supporting Starbucks’ prediction that community connection experiences will be sought out as the vaccine is distributed. Mr. Johnson said, “I believe Starbucks will be a top destination to facilitate social healing through human connection.”

DISCUSSION QUESTIONS: Will its newer formats and features (pickup, curbside, drive-thru, etc.) amplify expansion opportunities for Starbucks in the years ahead? Do you see post-pandemic changes in behavior as more of a benefit than a drawback for Starbucks?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Historically Starbucks has done a great job of knowing their customers and innovating to meet demand."
"I think Starbucks is moving ahead with a visionary approach that will yield long-term success."
"I’d be really concerned if I were McDonald’s or Dunkin’, whose franchisees are not hearing about expansion but contraction."

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19 Comments on "Starbucks sees even more stores in its future"


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Mark Ryski
BrainTrust

Yes, I believe Mr. Johnson and the leadership team have it right. As successful as Starbucks is in North America, it still has plenty of room to grow internationally — it already has a significant and growing business in China. New formats and service options like optimized drive-thru and curbside are all smart, new ways to think about store design. And while there is no doubt that the pandemic has significantly impacted our ability to socialize, I expect that once the virus is under control, there will be great demand to re-connect with people – and a coffee at Starbucks may be the perfect place to do it.

Bob Phibbs
BrainTrust

I’d be really concerned if I were McDonald’s or Dunkin’, whose franchisees are not hearing about expansion but contraction. Starbucks was first to market in the specialty coffee business and their ability to grow cannot be overstated. Especially when their social stances are in line with the bulk of Millennials and Gen Z.

Brian Cluster
BrainTrust

Starbucks is almost a 50-year-old company but has an innovative culture, strong digital abilities and an appeal to Gen Z and Millennials. With a variety of formats including kiosks and drive-thrus, Starbucks has plenty of room for store location growth internationally and in North America.

I agree that after the pandemic, consumer behavior will swing away from at-home activities to connection and social behavior which will definitely drive continued growth at Starbucks and other cafes.

Lee Peterson
BrainTrust

Starbucks is one of the pandemic winners for exactly the reasons outlined in this piece: they just leapt ahead to figure out and accelerate pickup/delivery and touchless, which was going to happen anyway. Talk about world domination. Twenty-two thousand more stores, by the way, is about 50 a week for nine years — they better get going!

Raj B. Shroff
BrainTrust

Yes, newer formats and features will amplify expansion opportunities, clearly they have insights into consumer engagement with their business and quickly fill gaps when appropriate.

I agree that post-pandemic we will see a rush to reconnect socially and businesses such as Starbucks will benefit from that trend.

Gene Detroyer
BrainTrust

Ms. Brewer says, “And since these are smaller stores, without seating areas…” Kevin Johnson says, “I believe Starbucks will be a top destination to facilitate social healing through human connection.” Perhaps I am reading out of context, but Starbucks’ success has been based on social gathering. While they have made great strides in more efficiently servicing the needs of a “cup and go” crowd and will continue to do so, Starbucks without gathering is not Starbucks.

Dave Bruno
BrainTrust

While I sometimes wonder at the thinking behind the density of Starbucks stores in some locations, they clearly understand their real estate/store location model. If Starbucks says they have the capacity for 800 more stores a year in the U.S., then I believe them — even if there are already five locations within a half-mile radius of my suburban home!

David Mascitto
Guest

Growing customers by expanding into underserved markets (e.g. the suburbs) is a great idea if expansion costs can be kept in check. Starbucks seems to have that covered with their cost-effective drive-thru/small format locations.

Paula Rosenblum
BrainTrust

With or without COVID-19, Starbucks is challenging my core belief that no market is infinite. It just keeps growing and growing. I think they’re right about the emphasis on sustainability, but the social healing thing is going to be a temporary phenomenon. We’ll all remember we don’t really like each other that much. 🙂

Still, I am awestruck at the seemingly infinite market for a brand of coffee that I don’t even like (I’m a Dunkin’ fan).

Ananda Chakravarty
BrainTrust

It may be temporary – but I suspect it will last as long as the pandemic. That’s plenty of time to capture loyalty and market share.

I am also a Dunkin’ fan — and some markets seem infinite in our tiny lifetimes. They said the same about selling natural ice in the 1800s – which lasted over 100 years.

Meaghan Brophy
BrainTrust

It’s hard to imagine that there’s a sustainable demand for 22,000 more Starbucks locations, but historically Starbucks has done a great job of knowing their customers and innovating to meet demand. Continued focus on drive-thru and pickup formats will absolutely help Starbucks continue to grow.

Post-pandemic, I think people will seek to reconnect with friends and engage in social activities like dining out and meeting in coffee shops. However even if that spike in going out to restaurants and coffee shops is temporary, Starbucks will have steep competition with the beloved local businesses that are able to make it through the pandemic.

Ricardo Belmar
BrainTrust

Even during the pandemic, my local neighborhood Starbucks has had a neverending drive-thru line at all hours of the day. So yes, Starbucks certainly has room to grow with pickup oriented formats! Much like densely urban population centers seem to grow Starbucks locations like weeds in every street corner, so can suburban locations grow almost exponentially. With more people working from home, the desire for coffee has spread outside the urban office and Starbucks sees the opportunity here as a very big one. For those locations with seating areas, they will no doubt return to being the “third place” for people to congregate and socialize once it’s no longer a health hazard. That said, I can easily see suburban locations with a full-service Starbucks cafe and then on the opposite corner of the shopping center or nearby pad site, a pickup only location with both being equally busy all day long.

Ananda Chakravarty
BrainTrust

More locations offers more marketing, more community presence and more social interaction. Especially as we move out of the current scenario to a post-pandemic environment, Starbucks will have the leg up on competitors. Any new operation in a neighborhood always receives an initial uptick in business – and these expansions will be taking place just as consumers will have the option to visit their new baristas in person. Great timing for Starbucks and the pre-announcement helps to keep the focus on the post-pandemic world. This is about market share and as long as the market avoids any further recessionary complications, Starbucks will be poised to collect.

Ryan Mathews
BrainTrust

Put me in the bullish on expansion camp. I’m surrounded by Starbucks, and all of them are crowded — at least in normal times. As to the post-pandemic period, I think Starbucks will be one of the big winners. Even if a significant number of people continue to work from home, I’m betting they will continue to take their coffee breaks at Starbucks.

Ed Rosenbaum
BrainTrust

Starbucks became a destination place almost from the beginning. Now, more than ever, people are looking for reasons to be out of their homes, even if it is only to get a cup of coffee. Starbucks knows what they are doing.

Mark Price
BrainTrust

The loyal Starbucks customer segment views the store as a “third place” — a safe place to relax and congregate when not at work or home. Post-COVID-19 such locations will be in high demand, and the expansion of the stores to meet that need makes great sense. In addition, drive-thru increases incremental sales from convenience-minded customers as well as core customers who don’t want to wait in line during peak hours.

I think Starbucks is moving ahead with a visionary approach that will yield long-term success.

Doug Garnett
BrainTrust

All in all, Starbucks has chosen a smart strategy to ride the return of the consumer after the pandemic is controlled.

That said, the idea that pure pickup stores create “community” is quite off-target and Starbucks should know better. They have very accurately identified their role as a “third place.” (Home, work, third place.) And customers will want their third place. A pickup store is NOT a third place.

When I was part of a team who pitched Starbucks/Howard Schultz on a beans campaign in 1993, we were trying to convert store value into home beans value. Doesn’t work. And while Starbucks has grown their retail location sales, it is not easy to suggest you’re delivering a third place without a third place.

Starbucks drive-thru and standard stores? Brilliant. Pure pickup? I’m very skeptical.

Cynthia Holcomb
BrainTrust

COVID has created new life workarounds, new home-based simple comforts. Personally, I believe our new, COVID ways of living will be heavily influenced by these new habits and ways of living we all were forced to discover to protect our personal life balance and happiness during COVID.

Starbucks sees the bigger picture: work from home, the move away from cities, working from anywhere, using Zoom, shopping online, etc. all as huge shifts in the way we live. Starbucks increasing its vast network of stores, continued solid product consistency, and now expanded drive-thru and BOPIS options are tapping into a newly created way of living and working from home. I am a fan!

Michael Berne
Guest

Regarding this move to smaller locations without seating: Starbucks Coffee’s announcement of cafe closures in the central business districts of several superstar cities has received a lot of attention, and appears to be a move away from its “Third Place” function. The coffee giant claims that a shift towards more pickup/delivery-only locations will do the opposite, by reducing in-store congestion at the traditional coffeehouses that remain in a post-COVID-19 world. I wonder, however, whether the move is to some degree a concession to the reality that, in contrast to when the green mermaid first arrived in the urban core many years ago, most such areas now boast a wealth of indie/artisanal coffeehouses that outflank it in this regard. Indeed, pre-COVID-19, the Starbucks Coffee locations in the heart of Manhattan always felt more like miniature versions of Grand Central Terminal than places where everyone knew my name…

wpDiscuz
Braintrust
"Historically Starbucks has done a great job of knowing their customers and innovating to meet demand."
"I think Starbucks is moving ahead with a visionary approach that will yield long-term success."
"I’d be really concerned if I were McDonald’s or Dunkin’, whose franchisees are not hearing about expansion but contraction."

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