It is not just a frivolous move to attract health-conscious and lactose intolerant consumers. There are good reasons for the company to put almond milk on the menu. And there are also good reasons for investors to get excited about it. Starbucks' shares rose slightly in Tuesday trading.
Dubbed "Almondmilk," the specially formulated dairy substitute will be available in 4,600 Starbucks locations in the Mid-Atlantic, Northeast, Northern California and Pacific Northwest on Sept. 6 before hitting all U.S. stores by the end of September. There will be a 60-cent charge to order Almondmilk in beverages. The company already offers soy and coconut milk.
Believe it or not, there has been consistent clamor for a non-dairy option from vegans, lactose intolerants and everyone in between. In fact, the My Starbucks Idea page, where customers can make suggestions to the company, has received more than 95,000 requests for dairy-free milk in the last five years.
Consumer research echoes this trend. According to the market research group Mintel, about 49% of Americans consume non-dairy milk (although not necessarily exclusively). Non-dairy milk is simply seen as healthier, and U.S. consumers are switching as a preference, not a necessity.
The non-dairy revolution is so strong that by 2020, Mintel projects that sales of dairy milk will drop by 11%.
From 2013 to 2014, sales of dairy milk alternatives such as almond, soy, and coconut grew by 30%. Almond has remained the most popular among the three, grabbing about 60% of the market. Retailers such as Costco and Wal-Mart offer almond milk in large quantities, and Dunkin' Brands has already been offering almond milk in its beverages at Dunkin' Donuts. Offering this alternative simply makes good business sense, and investors stand to reap rewards.
Analysts at the technology and consulting group Trefis point out that "beverage spend per customer visit" is a key metric for Starbucks, which also accounts for its revamped rewards system that encourages big spending). Starbucks believes that almond-milk beverages will attract more customers willing to spend extra money for a dairy alternative, boosting the company's beverage spend metric from $5.20 to nearly $5.40 by 2023. Over the long term, this can add up in a big way.
By offering almond milk (or "Almondmilk"), Starbucks is demonstrating that it has the wherewithal and ability to deliver customers what they want. That's going to continue to help boost the company's bottom line over time.
Starbucks is a great play for investors looking for safe profits from America's caffeine obsession... as well as its desire to be healthier.
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