Starbucks announces three-pronged growth strategy
Starbucks Corporation announced a set of “strategic priorities,” such as increasing their digital presence to accelerate growth and create long-term shareholder value.
Starbucks’ three priorities are as follows: Accelerating growth in their long-term growth markets, namely U.S. and China, expanding their global reach through the Global Coffee Alliance and focusing more on increasing shareholder returns.
“While certain demand headwinds are transitory, and some of our cost increases are appropriate investments for the future, our recent performance does not reflect the potential of our exceptional brand and is not acceptable,” said Kevin Johnson, Starbucks president and CEO in a press release. “We must move faster to address the more rapidly changing preferences and needs of our customers. Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value.”
The company’s initiatives will enable the company to adapt quickly to changes in consumer preferences. This includes accelerating product innovation around their “core beverages” such as coffee, while leveraging the growing tea and refreshment category, as well as recognizing consumer behaviour trends towards health and wellness.
Starbucks is actively expanding the breadth and depth of digital relationships with current and new customers. The company has added 5 million new digitally registered customers since April of 2018 and 2 million active Starbucks Rewards members, up 13 per cent from the previous year. For 2019, they expect newer digital initiatives to contribute one to two points of comp growth in the U.S., supported by a redesigned Starbucks Rewards program that provides customers more choice around redemptions and payment, as well as expanded personalization capabilities for customers that have a digital relationship with the company.
Starbucks Corporation hopes the execution of the new priorities will improve the return profile of the business; Starbucks now expects to return approximately $25 billion in cash to shareholders in the form of share buybacks and dividends through 2020. This represents a $10 billion increase from the cash return target announced on November 2, 2017.
Starbucks is actively exploring strategic options to license company-operated stores in other appropriate markets, such as Canada.
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