Starbucks targets millennial customers with coffee for $10 a cup

Starbucks is looking to raise its profile among millennials by selling upmarket coffee at $10 (€9.30) a cup at a select number of ‘reserve’ brand stores and ‘tasting rooms’ in major cities as part of a five-year plan targeting annual revenue growth of 10%.

It was recently announced that Starbucks’ co-founder Howard Schultz will step down as CEO in April to focus on building the group’s new range of high-end coffee shops.

The company yesterday said it would add 12,000 stores globally by 2021 and target comparable sales growth in mid-single digits and profit growth of 15% to 20% a year.

The world’s largest coffee chain also unveiled a new feature within its mobile app that uses voice command or messaging to place orders.

The feature will be tested first on Apple’s iOS operating system in early 2017, Starbucks said at its investor conference yesterday.

The company also plans to open an outlet of its high-end chain, Reserve Roastery and Tasting Room, in Europe, bringing the number to five globally. Details of that launch will be announced early next year.

Starbucks opened its first Reserve coffee roastery and tasting room in Seattle in late 2014, which roasts limited-supply Reserve coffees that sell for up to $50 per 8-ounce package.

The company plans to open a roastery and tasting room in Shanghai next year, followed by launches in Tokyo and New York in 2018.

Starbucks also said it would accelerate the opening of Reserve coffee “bars” selling premium coffee within Starbucks cafes to 7,400 stores by 2021.

The company had set a target of opening these bars in up to 1,000 cafes by the end of 2017.

Starbucks’ revenue has been growing at an average rate of 12.76% over the past five years.

The transition marks a turning point for Starbucks, which introduced millions of people around the world to higher quality coffee and espresso drinks and now must find a way to avoid being labelled pedestrian when compared with upscale rivals like Blue Bottle and Intelligentsia, which are popping up in US cities.

“Starbucks is the millennials’ parents’ coffee house and Starbucks is acutely aware of that,” said Ric Rhinehart, executive director of the Specialty Coffee Association of America.

Starbucks’ Reserve projects are “a reminder that they did this first and they do this best,” said AB Bernstein analyst Sara Senatore.


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