Starbucks Innovates to Continue Growth

Restaurants have been facing an increasingly challenging environment in recent years.  2016 was an especially difficult year, with declining sales for many brands and widespread talk of a “Restaurant Recession”.  Forecasts for 2017 predict much of the same.

Typically, the economy gets the blame for falling sales – although 2016 was a solid year for the economy and job growth.  In some cases, the fault for poor results is attributed to increasingly tenuous explanations.  Among other factors blamed in 2016 were The Olympics and the Presidential Election.

Surely though a key factor must be the fact that many brands operate more or less on auto-pilot, doing the same thing the same way, with little adaptation to a changing environment.  Tired stores, menus that remain unchanged, and slow adoption of technology are some examples of accepting the status quo.

In contrast, Starbucks has embraced innovation in many forms, and the results have helped drive continued growth.  In 2016 Starbuck’s Revenues grew to $21.3 Billion from $19.2 Billion in the prior year, representing top-line growth of 11%.  An impressive achievement, particularly given the firm’s large revenue base.  Revenue growth in the prior year was even more impressive, with 17% growth from 2014’s figure of $16.4 Billion.

The company as we know it has scarcely been in existence for three decades.  Here’s a look at its history since the 80’s.

https://www.youtube.com/watch?v=LnA7n9qSB7E

Going forward, Starbucks is exploring a number of new concepts.  One of them is the new Reserve Stores, which seeks to capitalize on the trend started in Seattle towards more upscale, vintage coffees.  Bloomberg explores the trend in this video.

https://www.youtube.com/watch?v=D3BtpkQVOi0

An in-depth look at the flagship Reserve Store is shown here:

https://www.youtube.com/watch?v=pBatO5_-h08

Whether Starbucks succeeds or fails in this new initiative, the development of the Reserve Stores shows how even a large company can stay attuned to cultural trends and changing behaviors to continue to drive growth to new levels.  In contrast, most brands as large as Starbucks tend to stick close to what they know, long after the brand plateaus or goes into decline.  Innovations, if any, are incremental and limited in scope.

Unlike brands that “play it safe”, an extensive list of current innovations and initiatives underway by Starbucks shows an openness to change.  These efforts illustrate just how aggressive Starbucks is in exploring a variety of efforts on multiple fronts:

  • Heavy Technology Innovation. $300 Million in “Partner & Digital Projects” in 2016. Double 2015’s $145 Million.
  • Supply Chain: 99% of Coffee Ethically Sourced
  • New Beverage Development (Coffee & Tea Drinks)
  • New/enhanced Food Menu (e.g. Organic Soups)
  • Expanded breakfast items (e.g. Sous Vide Egg Bites) to drive Breakfast Sales
  • Alcohol Sales to Drive Evening Sales
  • New Store Designs (e.g. Starbucks Express, Starbucks Reserve, Starbucks Roasteries)
  • New Digital Experiences (e.g. Music, Spotify Integration)
  • Mobile Order & Pay
  • Delivery
  • In-store tech innovations (e.g. cordless mobile device chargers)
  • My Starbucks Barista (A.I. technology)
  • Loyalty Programs – 12 Million Starbucks Rewards Members, 8 Million Mobile Pay Customers
  • New Locations (37,000 by 2021; an incremental 12,000 stores)
  • New Partners (e.g. Italian Food Partner, Princi)
  • Princi Stores in Seattle, New York, and Chicago by 2018
  • China Expansion (i.e. 2,500 stores in 118 cities with 30,000 employees; growing to 5,000 stores by 2021)

To see more details regarding these Starbucks’ initiatives in 2015 & 2016 please visit the following links:

https://news.starbucks.com/news/10-announcements-starbucks-investor-day-2016

https://news.starbucks.com/news/year-in-review-2015-starbucks-innovations

Starbuck’s results illustrate that, despite an increasingly challenging environment for the restaurant industry, embracing innovation, trying new ideas, and remaining attuned to cultural trends can result in continued relevance and growth.

 
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