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Starbucks to Grow Grocery Business Tenfold

(Starbucks (SBUX) growing grocery business tenfold report updated with company's denial it is in talks to acquire Peet's Coffee (PEET).)
SEATTLE (TheStreet) -- Starbucks (SBUX) worked to hold onto the week's gains Friday after the coffee giant said Wednesday that it expects sales of its coffee and other products at grocery stores and retail outlets to one day rival its traditional coffee shop business -- meaning the operating segment would grow more than tenfold from its 2010 results.

On March 23 at Starbucks' annual shareholder meeting in Seattle, CEO Howard Schultz promised investors huge growth in the company's grocery business, less than a month after Starbucks' 12-year arrangement with Kraft Foods (KFT) came to an end.


Starbucks shares traded 0.4% lower at $37.42 at midday Friday, working to hold on to gains of 5% on Wednesday and 2.4% on Thursday.

Its coffee shop and retail business brought in $8.96 billion last year, accounting for around 84% of its net $10.71 billion in revenue, while its global consumer packaged-goods business garnered just $707.4 million in sales, or around 7%.

"The CPG (consumer packaged-goods) business as we know it today will rival the success of our Starbucks retail business" at some point in the future, Schultz said at the shareholder meeting in Seattle.

Deutsche Bank analyst Jason West resumed coverage of Starbucks shares Wednesday with a buy rating and $41 price target, representing a 17.3% upside to Tuesday's closing price. The analyst sees increasing momentum for Starbucks after spending the last couple of years focusing on its core business rather than growth.

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