The 7 Keys To Starbucks' Continued Success

By Markets Fool.com

It takes more than a latte a day to meet growth targets of 10% on the top line and 15%-20% on the bottom, but those are the numbers Starbucks intends to reach.

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Earlier this month, Starbucks CFOScott Maw spoke of these efforts as the keynote speaker at theBank of AmericaMerrill LynchConference in New York.

"Particularly emphasized in the last quarter is the breadth and balance of our growth," Maw said. "...That balanced growth becomes more and more important as obviously our international operations are growing a bit faster than our U.S. operations."

Maw also laid out a seven-step plan for continued growth that guides the coffee and tea retailer. Let's dig into what this means for Starbucks' future.


Starbucks' seven-tiered plan for growth. Source:2015 Consumer & Retail Conference.

Be the employer of choice
Starbucks places strong value in its employees and makes an effort to retain them, through programs such as an employee stock plan, health insurance for anyone working at least 20 hours a week, and online college tuition assistance.

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"We call our employees partners and that's partly because they have ownership in the company," Maw said. "Our stock-based equity programs go very deep down into the store at the barista level," he continued.

Maw also pointed out that the Starbucks offers its employees a number of quality of life benefits including free drinks and food while working. The company has also adjusted its pay rates to account for cost of living increases in its geographic markets.

Lead in coffee
While Starbucks has grown into more than just a coffee brand, Maw pointed out that the beverage remains its core offering.

"We want to lead in coffee," Maw said.

To dothatMaw highlighted the company's new Roastery facility in Seattle, which the company is using to make small batches of high-quality beans available in its stores. He also explained that, though much of the company's beverage innovation was happening in iced teas and other areas, coffee still offers significant opportunity.

"The Flat White which we just launched is off to a great start," Maw said of the new espresso-based offering.

Grow the store portfolio
While it seems like Starbucks stores are everywhere, that's not quite true, and the company plans to add 1,650 new stores in 2015. New store formats will include drive-through only stores and walk-through stores with no seating where you enter through one door, order, receive your product, then exit through another.

"Increasingly what gives us confidence around this is increasing analytics and capabilities around a broad base of store formats," Maw said.

The company is also increasingly using mobile stores on places like college campuses where it makes sense to only be there for part of the day.

Create new occasions
Another opportunity Maw sees for growth is increasing sales at times where stores are not as busy. In general, Starbucks stores have their largest traffic in the morning but are less busy in other dayparts.

The company plans to grow its lunch business which it intends to expand.

"Lunch will be the biggest growth percentage for us," Maw said.

Afternoon, he added, represents a big opportunity, mostly through offering refreshing drinks and snacks. He cited Teavana shaken iced teas and the company's Fizzio soda brand, both of which Starbucks is rolling out across the nation.

"That 11-3 daypart, those four hours, is where we have seen our highest comp growth over a one and two year period during most quarters," Maw added.

CPG brand growth
Mawalso sees huge opportunity in bringing Starbucks products to locations outside the company's stores.

"It's really about meeting our customers where they are," Maw said. "So, whether they are on the go, at home, or in the grocery store, we want to be able to have revelant offerings for our customers via CPG."

The CFO cited two major examples where he sees room for major growth -- single serve (primarily K-Cups) and international expansion around ready-to-drink beverages.

"We think there's a significant opportunity both to expand the countries we are in with ready to drink and to drive increased market share," Maw said.

Grow Teavana
Since buying Teavana in October 2013, the company has slowly introduced the tea brand into its stores. Teavana tea products have only been fully integrated into Starbucks stores since January, and Maw believes their growth potential is enormous.

"We continue to see lift both in price point and in unit volume as we introduce Teavana so we know we have a winner," he said.

Maw also pointed out the opportunity to add tea bars -- the company currently has six in the U.S. -- but acknowledged that the format needed to be refined.

Extend digital engagement
Maw shared some pretty impressive digital numbers for the company including the fact that a third of its transaction are conducted on a Starbucks card while 16% are on a mobile device. He also noted the company has 9 million active members in its My Starbucks Rewards program, a 23% increase from Q1 2014.

"One in six Americans got a Starbucks card last holiday season," Maw pointed out.

The next step in digital growth for the company will be to add ordering capability to its mobile app. "We'll continue to drive mobile adoption through mobile order and pay as well as mobile order, pay, and deliver," Maw said.

The company is rolling out mobile order and pay currently in 600 stores in the Pacific Northwest with plans to hit the rest of the U.S. later in 2015.

The article The 7 Keys To Starbucks' Continued Success originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. He plans to try the Flat White. The Motley Fool recommends Bank of America and Starbucks. The Motley Fool owns shares of Bank of America and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.