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Cold beverages mean hot sales for Starbucks

Thanks to Nitro Cold Brew and a new cold pumpkin drink, the chain’s same-store sales and traffic continued to improve.
Photograph courtesy of Starbucks

Starbucks went cold and fixed its sales.

The Seattle-based coffee giant said Wednesday that its same-store sales rose 6% in the U.S. in the quarter ended Sept. 29 as customers paid higher prices, made larger or more expensive orders and came in more often.

Much of that improvement came from higher beverage sales, particularly cold beverages.

Starbucks said its Nitro Cold Brew generated strong sales in the company’s fiscal fourth quarter. The chain’s Pumpkin Cream Cold Brew, which it began selling in August, also generated strong sales.

“We’re encouraged by the momentum,” CEO Kevin Johnson said on Starbucks’ earnings call Wednesday. He said the company expects the improvement to continue during the upcoming holiday season.  

On a two-year basis, which factors out one-time events, Johnson said that same-store sales rose 10%, the best performance in more than two years. Company executives said that same-store sales rose during all dayparts.

Globally, Starbucks’ same-store sales rose 5%, including 5% growth in China, the chain’s fastest-growing market, where it increased unit count by 17% last year. Executives are expecting a slower sales year next year in China, however, thanks to increased competition and a slowing economy.

But things don’t appear to be slowing down in the U.S., where Starbucks has regained its momentum. The company over the past year has implemented some changes in its stores, reducing some employees’ administrative tasks to free them up to work with customers.

That has improved service and, the company believes, sales. The chain’s improved sales and traffic have both been driven by its beverage business.

Roz Brewer, Starbucks chief operating officer, said the chain promoted its beverages heavily last quarter, including its flavored iced teas and its fall beverages. “That helped immensely,” Brewer said.

She added that the company’s drive-thru business has grown and “we will see that continue.”

Starbucks has continued to add new users to its loyalty program. Its Starbucks Rewards membership program grew 15% over the past year and now has 17.6 million users. That’s important for the chain, Johnson said.

“When a customer joins Starbucks Rewards, their spending level increases meaningfully,” Johnson said.

The company is increasing its technology inside of its stores to improve operations, too. The chain is adding new Mastrena espresso machines that enable workers to produce a triple shot of espresso in one pull, as opposed to the multiple pulls required on the older machines.

Those new machines are connected to the internet, giving Starbucks data on every shot of espresso it serves. And the chain can also tell if the machines need preventive maintenance.

Starbucks is also investing in artificial intelligence inside of its restaurants, an initiative called “Deep Brew.” That effort will power the chain’s “personalization engine.” It will also help the company optimize labor and inventory management.

“We plan to leverage Deep Brew in ways that free up our partners so they can spend more time connecting with customers,” Johnson said. “Deep Brew is a key differentiator for the future.”

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