3 Things to Expect From Starbucks in 2017
Earlier this month, Starbucks (NASDAQ: SBUX) dropped the bombshell that its longtime CEO would be ending his second stint in the top job, handing it over to COO Kevin Johnson on April 3, 2017. Once that happens, Howard Schultz will take the title of executive chairman and shift his focus away from day-to-day operations.
Johnson, who has been a board member for seven years, and COO since March 2015, brings a different set of experiences to the CEO's office. His appointment comes at a time when technology -- a field where he worked in senior positions for Microsoft for 16 years -- has become increasingly important to the coffee chain.
Johnson has already been a leader in that area for Starbucks and he should continue to drive innovation going forward. That, however, won't be the only area where major change is expected. Let's take a look at what the new year might bring.
Starbucks has big expansion plans for its Roastery model. Image source: Starbucks.
1. Schultz wants to build a new brand
While Schultz will relinquish the CEO title, he won't be settling into some sort of quiet retirement. He plans to try to build a new concept around Starbuck's Roastery model. He will "shift his focus to innovation, design and development of Starbucks Reserve Roasteries around the world, expansion of the Starbucks Reserve retail store format and the company's social impact initiatives," the company said in a press release.
Basically, Schultz, who was key in changing how Americans consume coffee, wants to do it again. He plans to lead Starbucks from one Roastery location in Seattle to three more in Shanghai, New York, and Tokyo in the next couple of years and a European Roastery set to open in 2019 in an as-yet-not-selected city. In addition, the company will be adding "Reserve experience bars" serving coffee produced in the Roastery locations in up to 20% of its stores (a not-insignificant number given that the chain has over 25,000 locations).
2. More cold innovation
Starbucks has learned something that rival Dunkin' Brands (NASDAQ: DNKN) has always known -- cold is hot. Dunkin' has always been a big proponent of iced coffee (partly because people in its home market of New England consume the stuff even in the dead of winter).
Starbucks began to discover that magic in 2015 when it introduced Cold Brew. It expanded those efforts with Vanilla Sweet Cream Cold Brew, Spiced Sweet Cream Cold Brew, and Nitro Cold Brew in select locations. Going forward, the company expects to continue pushing new cold innovation as it said in a press release that it "expects the cold coffee category to double in the next three years."
To deliver that, the company will release new drinks as well as the expansion of Nitro Cold Brew to major cities around the world. It will also expand its bottled line of Cold Brew, which it began selling to retailers including supermarkets and convenience stores in late 2016.
3. App innovation will continue
Starbucks has been a pioneer when it comes to developing its app. In 2016 that included rolling out Mobile Order & Pay across the chain and in 2017 it has big plans to continue that innovation.
At its recent investor conference, the company laid out a plan to offer a new interactive ordering system called My Starbucks Barista. Powered by what the company called "groundbreaking" artificial intelligence (AI), the new service will learn from customer interaction. That will let it make recommendations based not only on the user's past behavior, but also from people like them.
The technology, which lets customers place their orders viavoice command or messaging interface will first roll out to iPhone and iPad users in a limited beta in early 2017. Once released the technology will again push the company ahead of rivals. In theory, the new AI-driven virtual barista should lead to happier customers who spend more money -- a positive for both the consumer and the company.
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Daniel Kline has no position in any stocks mentioned. He believes Starbucks should pioneer technology to stop wobbly tables from making it hard to type. The Motley Fool owns shares of and recommends 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.