Starbucks Puts Breakfast Strategy Into Drive
Starbucks helps a lot of consumers get their mornings jump-started with its coffee and now the chain is looking to drive some incremental business with its breakfast sandwich lineup.
Beginning today, Starbucks will sell its line of breakfast and lunch sandwiches at stores located in Boston and elsewhere in New England. It will also introduce the sandwiches at some shops in Los Angeles.
The coffee shop chain has been rolling out the sandwiches on a market-by-market basis. The company currently offers the sandwich menu in Chicago, New York, Washington, D.C., Portland, Oregon and Charlotte, North Carolina. Today, more than 70 percent of Starbucks in North America serve either lunch or lunch and breakfast sandwiches.
In a November conference call with analysts, CEO Jim Donald was bullish on the company’s progress on the food front.
“Food continues to be a growing part of our business, and fiscal 2006 demonstrated significant progress in capturing some of the potential opportunities we have identified,” he said. “We’ve enhanced our offerings introducing additional reduced fat options in bakery and our new yogurt parfait. We’ve added new lunch items, we’ve expanded our grab-and-go lunches into new markets and to more stores, and we saw substantial expansion of our warm breakfast sandwich program, more than tripling the number of stores in which it is offered year-over-year.”
Starbucks’ positioning of its sandwich line is consistent with its beverages offering, a product that it touts as “superior” to the standard fare of fast food competitors such as McDonald’s, Burger King and Dunkin’ Donuts.
In addition, the coffee chain is looking to stake out a convenience position with sandwiches being sold at units with drive-thru windows. In Chicagoland, for example, 71 of Starbucks’ 214 locations have drive-thru windows. At the end of 2005, about 15 percent of Starbucks had a drive-thru. Since then, roughly half of all new Starbucks have been built with a drive-thru.
If Jim Skinner, CEO of McDonald’s, has any worries about Starbucks selling breakfast sandwiches at its stores with drive-thru windows, you wouldn’t know it. At last week’s earnings call, Mr. Skinner said it was testing new breakfast sandwiches and specialty coffee drinks. McDonald’s, he said, succeeds in the breakfast segment because it is “unparalleled in our delivery of breakfast, and we continue to work to protect that.”
Discussion Questions: Do you see the breakfast segment at foodservice heating up as operators such as Starbucks and Wendy’s begin to make a big push for share of stomach? Do you see further decline in the in-home breakfast business?
- Some Starbucks to Offer Breakfast, Lunch – The Boston Globe (free reg. required)
- Starbucks launches breakfast at drive-thrus Tuesday – Crain’s Chicago Business (free reg. required)
- Starbucks F4Q06 (Qtr End 10/1/06) Earnings Call Transcript – SeekingAlpha