Starbucks Corp share price up, to expand consumer base via two new store types

Starbucks Corp, the worlds biggest coffee-shop chain, is seeking to bolster its competitiveness by opening two new types of stores, one aimed at tapping the rising demand for upscale reserve coffee, while the other will be oriented towards on-the-go customers.

In order to appeal to the more demanding and deep-pocketed coffee consumers, the company plans to open at least 100 high-end cafes globally which will offer only reserve beans. Starbucks plans to open its “first of a kind” 15 000-square-foot reserve roastery in Seattles Capitol Hill neighborhood in December. The facility will showcase coffee-bean roasting and will house a tasting room, a store and a cafe offering its reserve coffees.

In a press release, Starbucks said that the roasterys visitors will experience a “union of coffee theater and manufacturing in a retail environment devoted to beverage innovation.”

The company introduced Reserve coffees to its lineup at a limited number of stores in 2010 and has enjoyed growing success. The rare coffee varieties are now available in 21 countries, with the latest addition to the list being Columbia. In the US, the new store portfolio has achieved a return of investment of about 50%, having averaged over $1.2 million in year-one sales.

The new roasteries will allow Starbucks to double its reserve-coffees list to 30 offerings and distribute them to more outlets. The companys move comes at a time when it is facing intensifying competition from upscale coffee sellers such as Intelligentsia and Stumptown Coffee Roasters, while fast-food chains such as McDonalds and Dunkin Donuts are seeking to gain market share in the low-end drive-through segment.

To battle the latter, Starbucks also plans to test smaller, express-format stores in 2015, with the first scheduled to open in Manhattan next year. These cafes will have a limited lineup of drinks and food and will aim to attract customers who are in a hurry.

Starbucks said that 40% of the locations it operates have a drive-through window and those outlets achieve higher sales growth compared to the ones without drive-through. The new express units will incorporate the companys digital payment platform, including mobile ordering, which will speed up service, but the number of stores to be opened has not been disclosed.

Cliff Burrows, president of the Americas region said, cited by Bloomberg: “Customers are interested in both accessibility to the brand as well as speed and convenience.”

Starbucks Corp rose by 0.48% on Thursday to close the trading session at $77.16 per share, marking a one-year change of +6.96%. The coffee-shop chain is valued at $57.96 billion. According to CNN Money, the 22 analysts offering 12-month price forecasts for Starbucks Corp have a median target of $90.00, with a high estimate of $99.00 and a low estimate of $80.00. The median estimate represents a +16.64% increase from the last price of $77.16.