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Starbucks Five-Year Plan: 12,000 New Stores And A Focus On China

While Howard Schultz’s upcoming retirement as Starbucks’ CEO has sparked many questions about the coffee giant's future direction, the company certainly isn’t slowing down its expansion efforts. Starbucks plans to add a whopping 12,000 stores globally by 2021, upping the brand’s projected store footprint to 37,000 locations.

The five-year expansion plan revealed at the Starbucks Investor Conference includes these ambitious goals:

  • Add more than 5,000 new stores in China;

  • Expand its high end Roastery and Starbucks Reserve store experiences;

  • Introduce artificial intelligence (AI) capabilities to its mobile app;

  • Increase revenue by 10%;

  • Increase earnings per share (EPS) by 15% to 20%; and

  • Drive mid-single-digit comparable store growth each year.

China appears to be the most urgent imperative in Starbucks' global expansion plans going forward; the coffee giant projects that it will one day eclipse the U.S. market in size. China is already home to nearly 2,500 Starbucks locations and the company estimates it is opening an average of more than one store per day in the country. This pace is set to accelerate to achieve a total of more than 5,000 additional stores by 2021.

As part of the Chinese expansion, Starbucks is collaborating with social media platform WeChat to bring digital payments and social gifting capabilities to its mobile audience. With WeChat having more than 800 million monthly active users, Starbucks has a tremendous opportunity to engage potential shoppers before, during and after they pick up a cup of coffee.

The WeChat payments feature complements Starbucks’ own mobile payment system for its My Starbucks Rewards program members, which it launched in China earlier in 2016.

Schultz’s Destination Dream To Become A Reality

Starbucks is further highlighting the “experience” aspect of its stores as part of the expansion, with an increased emphasis on the higher end Roastery and Reserve brands. This focus is Schultz’s pet project in his new role as Executive Chairman, fulfilling his desire to portray the brand as a destination spot for consumers. Since the company’s expansion is happening so rapidly, the introduction of numerous brands will be carried out to prevent product dilution.

This plan includes opening 20 to 30 planned Roasteries, which are the company's tourist-friendly locations that serve premium coffee and drinks for $10 a cup. The first location is in Starbucks' headquarters city of Seattle, with plans set to open the next Roasteries in Shanghai in 2017, Tokyo and New York City in 2018. A fifth location in Europe will be announced early in 2017.

Each Roastery will serve as the foundation for the brand’s new Starbucks Reserve store formats, which will integrate the unique culinary experience of the company’s new Italian food partner, Princi. The first of these new stores will open in Seattle and Chicago in the second half of 2017, with plans to open 1,000 or more globally over time. In addition, Starbucks plans to open standalone Princi stores in Seattle, New York and Chicago in late 2017 and in early 2018.

Starbucks also is extending elements of the Roastery experience to its core Starbucks stores, with the expectation of adding Starbucks Reserve experience bars in up to 20% of its total portfolio (including new and renovated locations) by 2021.

AI Brings Voice Commands, Personalization To Mobile App

With eight million people now using the Starbucks mobile app to pay ahead of pickup times, Starbucks is adding yet another ordering functionality to the mobile experience. The brand has unveiled an artificial intelligence (AI) platform, My Starbucks Barista, enabling customers to place their orders via voice command or a messaging interface. The feature will roll out first on iOS in limited beta in early 2017 and be made available to more iOS and Android users in subsequent releases.

By early 2017, the company expects to complete the rollout of personalization features such as suggested selling and recommendations during Mobile Order and Pay checkout.

 

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