"We are waiting for that right moment, the tipping point with food," Starbucks president, global channel development Michael Conway told TheStreet at an event in New York City held to showcase the company's latest coffees and teas destined for supermarket shelves.
Conway added, "I think we are still growing and developing our food business, but we are starting to get some favorites in the morning with our breakfast sandwiches -- it's longer than a year [before we would see food]."
The distribution network for food is more complex, explained Conway, as items have to be frozen or refrigerated. Bottled frappucino drinks and bagged coffee, on the other hand, don't require such logistics, and have much longer shelf life relative to food.
The segment that Conway oversees -- which includes sales of bottled frappes, bagged coffee and K-cups -- has quietly morphed into a solid profit driver for the coffee giant. Total sales for the fiscal year ended Sept. 27 at Starbucks' channel development business increased 12% year over year to $1.7 billion, with operating profits gaining 17.3% to $653.9 million. The segment now represents about 9% of annual revenues for Starbucks.
No Starbucks food yet in grocery stores, but its first cold brew coffee will arrive later this year.
Given the hearty demand for Starbucks food at its retail stores, the company may want to consider moving up its timeline for bringing its food to grocery stores.
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Sales of food rose an impressive 20% year over last year for the first quarter ended Dec. 27, and contributed three percentage points to the U.S. division's 9% same-store sales increase comp sales. Helped by new product introductions, Starbucks breakfast sandwich sales surged 40% from the prior year, while those of bistro boxes spiked 65%.
Food now represents about 19% of Starbucks sales at company-operated locations.
There is a precedent for major fast food brands bringing some part of their restaurant foods to supermarket aisles, mostly through licensing agreements.
In 2014, Yum! Brands (YUM) - Get Report owned Taco Bell launched its own branded taco kits and hot sauces packets in grocery stores. More recently, it has released bottled sauces based on products at its restaurants. Cinnabon, which has its own retail locations, has licensed its name to items from cinnamon bread to Kellogg's (K) - Get Report cereal.
And hey, who can forget those frozen White Castle hamburgers, which are still on sale today.