On Friday, Starbucks (SBUX) announced that it will stop selling beer, wine and some specialty food at more than 400 locations nationwide.
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The program that the Seattle-based coffee giant is winding down, Starbucks Evenings, which was devised to attract a well-heeled crowd after the morning and afternoon coffee rushes.
The fact that the program is now being ended points to possible future moves by the company and potential profits for investors.
In December, Starbucks' much-loved CEO, Howard Schultz, announced that he would be stepping down from his post in April. The reason Schultz, who was reinstated as CEO in 2008 after an eight-year hiatus, gave for his role switch (he will become executive chairman) is that he wants to focus on building out Starbucks' chain of higher-end stores.
Starbucks opened its first Roastery in Seattle in 2014, but the company has plans to expand that into a global, sister chain, helmed by Schultz. These stores offer on-site bean roasting and fancy methods for coffee preparation. Starbucks plans to open at least 20 Roastery locations worldwide. The stores will compete with high-end chains, such as Intelligentsia and Blue Bottle.
But Starbucks also intends to open about 1,000 locations that sell its high-end Reserve coffee lines. Although these stores will lack all the accoutrements of the Roastery, they'll still be luxury coffee shops with special preparation methods and blends.
The Roastery and Reserve locations will do more than offer even more expensive cups of Starbucks coffee: The chain is to feature gourmet food and an atmosphere similar to a luxury cocktail bar.
Which makes sense if this is going to be where Starbucks refocuses its alcohol-selling strategy.
Starbucks Evenings was practically what the company envisions for its Roastery all day. Although only 439 company-owned Starbucks locations ultimately served beer and wine, the company had originally planned in 2010 to spread alcohol sales to "thousands" of locations.
The Roastery and the Reserve sound like better ideas for fancy evenings out. The chains have the potential to be huge hits and moneymakers, especially among the foodie millennial crowd.
During the day, Starbucks intends to extend its lunchtime menu in regular stores. Recently, company executives said that lunchtime provided the biggest opportunity for food sales, with as much as 50% of Starbucks visits occurring after 11 a.m.
The company intends to offer fresh and healthy salads and sandwiches, as well as a line of organic soups. According to incoming CEO Kevin Johnson, food will eventually account for as much as 25% of Starbucks' sales by 2021.
While the swanky luxury locations aim to compete with your local chichi cocktail bar, Starbucks's lunch concept sounds like the company is going after fast-casual competitor Panera Bread (PNRA) .
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It will be interesting for investors to watch what unfolds as Starbucks attempts to grow even bigger. There could be big profits in the stock yet. However, if all you want is a plain old cup of Joe, consider Dunkin' Brands. The company's Dunkin' Donuts locations are indeed offering more trendy, gourmet options, but the real core of the company lies in its no-frills coffee.
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