Since the financial crisis, the Starbucks story has been marked by strong execution and industry-leading earnings growth, as the company invested in the high-margin packaged goods businesses and single serve Via and K-Cup coffee drinks, which are now a lever of top and bottom line growth.
Now, in talking boldly about relatively small recent deals -- a $100 million June acquisition of bakery La Boulange and the $30 million purchase of juices specialist Evolution Fresh in late 2011 -- Schultz is dismissing past struggles to grow the nation's largest coffee company, banking on the consumer packaged goods (CPG) venture as a new model to grow shares and store offerings.
Schultz appears to be making two points: he wants to reinforce that Starbucks sells a core differentiated product -- the best coffee that can organically grow in profitability over the years. Second, the company can expand from that core to grow sales without diluting existing offerings or profit margins. In the past, Starbucks has seen diminishing returns from store-led growth initiatives.
With this year's La Boulange bakery deal, Starbucks said it will sell breads in existing stores and expand the California-based chain nationally, at once adding to its in-store food proposition, while growing non-Starbucks branded stores.The bakery deal is just the latest example of Schultz's comment from November, "