Starbucks to expand grocery products

With fewer growth opportunities for growth in its domestic and international business, it’s not surprising that Starbucks is looking to grow its branded food and beverage offering for grocery.

One just has to look at the US$300-million a year success story of its Via instant coffee to see the potential of the market.

Starbucks’ product lineup is said to be targeting health and wellness, with rollout expected over the next two years.

A focus on its consumer products would lead to more profitable margins than its core retail business with estimates of Starbucks’ consumer products division generating operating margins of 30 to 35 per cent; U.S. retail margins are close to 20 per cent this year.

To further his mission to get into the grocery channel, Starbucks CEO Howard Schultz has taken over the shipping of its packaged coffee to supermarkets from Kraft Food Inc.

More recently, taking advantage of the fast-growing single-brew or K-cup systems, Schultz signed on with Green Mountain Coffee Roasters to sells its branded coffee and tea for use in Green Mountain’s Keurig single-cup machines in its own stores and other U.S. and Canadian retailers this fall.

This latest move by the java giant is seen as a serious push into consumer products, with analysts believing Starbucks could reinvent packaged coffee goods. Starbucks has gone as far as to hire Procter & Gamble executives and others from similar packaged goods companies.

Still Starbucks faces an uphill battle in stealing away shelf space from other supermarket coffee brands, including private labels.