Starbucks to Open Princi Bakery Inside Seattle Roastery
November 07 2017 - 8:42AM
Dow Jones News
By Julie Jargon
Starbucks Corp. is making its next move into the high-end food
and beverage market, seeking to find new sources of revenue amid a
broader slowdown in the industry.
The opening on Tuesday of luxury Italian bakery Princi inside
Starbucks's Seattle Reserve Roastery is one way the coffee giant is
seeking to differentiate itself. Starbucks last week reduced its
long-term sales and profit growth outlook due to the difficult
retail environment.
Howard Schultz, who stepped down as chief executive in April to
focus on developing high-end coffee shops within the company, said
Starbucks needs to create another brand tier to appeal to more
affluent consumers.
"If we don't do it, someone else will," he said in a recent
interview.
The company, he said, is spending "tens of millions of dollars"
on the venture that it announced last year involving the Princi
bakeries, though he declined to give more specific details.
Mr. Schultz said he envisions including Princi bakeries inside
all of the Roastery shops the company plans to open globally.
Roastery sales still are too small of a contributor to move the
needle for the company's earnings. But the average transaction in
the Seattle Roastery -- a tourist destination -- is $20, compared
with $5 at a traditional Starbucks, Mr. Schultz said.
Some industry analysts question the wisdom of opening more
outlets selling premium-priced products when there already is an
oversupply of food-and-beverage retailers that consumers have been
shunning in favor of lower-priced alternatives.
"Diluting management's attention to a side project that it isn't
going to be material and that further entrenches them in operating
retail stores at a time of accelerating competition and decreased
traffic doesn't sound like a great idea," said John Zolidis,
president of Quo Vadis Capital, an independent equity research
firm.
Inside its Princi's first commercial kitchen, an
11,000-square-foot space adjacent to Starbucks headquarters, bakers
make dough, chop vegetables and prepare ingredients, including some
imported from Italy, for thrice-daily delivery to the Roastery less
than four miles away, where cornetti (the Italian version of a
croissant), pizza and bread made from owner Rocco Princi's recipes
are baked in one of three huge pizza ovens. Starbucks said it plans
to open a commercial kitchen in every market where a Roastery will
be built, including Shanghai, New York and Chicago.
Cliff Burrows, the Starbucks executive in charge of the
Roastery, Reserve and Princi businesses, said the central kitchens
are necessary because Princi bakeries will be too small to
accommodate a full kitchen and that it is critical that the
products be served fresh.
Starbucks said it is also planning to open 1,000 standalone
Princi bakeries around the world, with hundreds in the U.S.,
serving small-batch Starbucks "reserve" coffee.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
November 07, 2017 08:27 ET (13:27 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Starbucks (NASDAQ:SBUX)
Historical Stock Chart
From Apr 2024 to May 2024
Starbucks (NASDAQ:SBUX)
Historical Stock Chart
From May 2023 to May 2024