Starbucks CEO promises huge grocery growth

By @ibtimes on

Starbucks Corp wants to make sales of its coffee and other products in the grocery aisle rival its traditional cafe business, according to Chief Executive Howard Schultz.

The world's biggest coffee chain is betting it can use the power of its brand to sell a portfolio of goods -- such as Via instant coffee and bottled Frappuccino -- everywhere food and beverages are sold, whether in a supermarket in the United States or a vending machine in Asia.

The CPG (consumer packaged-goods) business as we know it today will rival the success of our Starbucks retail business at some point in the future, Schultz said at the company's annual shareholder meeting in Seattle on Wednesday.

That is an ambitious target for Starbucks, whose U.S. retail business is its powerhouse, generating 71 percent of its overall revenue of $10.7 billion for the fiscal year that ended October 3, 2010.

In 2010, Starbucks' global consumer packaged-goods business brought in only $707.4 million in revenue.

Starbucks took a big step toward its goal on March 1, when it split with long-time grocery distribution partner Kraft Foods Inc .

While it is not known how much it will have to pay Kraft for ending that relationship, the move gives Starbucks more control over packaged coffee sales through supermarkets and other stores.

Starbucks changed its logo this month, removing the words 'Starbucks' and 'coffee', a move which Schultz said would help its grocery business as it expands beyond coffee into tea, juice, and a variety of other products.

At the same time, Starbucks is moving heavily into the $4 billion U.S. single-serve coffee market, teaming up with market leader Green Mountain Coffee Roasters Inc earlier this month.

In front of 2,000 shareholders at a packed auditorium in Starbucks' hometown of Seattle, Schultz promised more growth for the company, which has just over 17,000 stores worldwide and posted its best-ever financial results last fiscal year.

Put your seatbelts on, the best is yet to come, said Schultz, to warm applause.

Starbucks, celebrating its 40th anniversary this year, has made many Seattle locals rich. Just $20,000 invested in 1992 in the company's initial public offering is worth more than $1 million today.

Schultz also signaled an expansion of the company's hugely popular reward card program. He said millions of customers would soon be able to get rewards on their Starbucks card when they buy Starbucks products in grocery as well as in Starbucks stores.

Starbucks' shares, which are highly sensitive to coffee prices, rose 4.4 percent to $36.48 on Nasdaq.

May arabica coffee futures trading on ICE dropped 4.85 cents to settle at $2.6860 per lb Wednesday, on pressure from chart-based indicators and the strong U.S. dollar.

(Reporting by Bill Rigby and Lisa Baertlein, editing by Maureen Bavdek, Bernard Orr)

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