Here are 5 big details Starbucks just revealed to investors

The coffee shop chain sells a lot of gift cards, has plans for late-night delivery and new product introductions. And young people like their beverages cold.
Starbucks cold brew
Young people tend to drink their cold coffee daily, according to Starbucks. | Photo courtesy of Starbucks.

Starbucks reported earnings this week, a report that included weakness in the U.S.and in China but stronger profit margins.

But company executives also revealed a few interesting tidbits and pieces of news, as they frequently do when they meet with analysts on their earnings call. Here are a few key details executives revealed this week.

New beverage platforms

The Seattle-based coffee chain concept earlier this week brought its Oleato, olive oil-based coffee beverages to locations nationwide. But it plans a lot more.

Company executives said they plan to come out with three new beverage platforms over the next six months. They would not reveal what those platforms will be (our bet: one of them is an energy drink). But executives promised they would do well among its younger consumers.

Each of the platforms “is squarely aimed at our Gen Z and millennial customers across the range of coffee and cold beverages, and compelling in the afternoon,” CEO Laxman Narasimhan said. Afternoons are key for the chain, which last quarter lost its occasional customers who typically visit in the afternoons.

Meanwhile, Starbucks is introducing a new coffee roast, Starbucks Milano Roast, to celebrate the chain’s five years in Italy, the country of its inspiration. The roast is “inspired by the art and culture of Milan.”

The GoPuff test

Starbucks was generally late to the third-party delivery game but that business is booming right now. Delivery sales rose 80% over the past year, though it only represents 2% of its transactions. The company is planning to focus more of that business through delivery-only kitchens such as CloudKitchens.

The company is also testing overnight orders with the delivery company Gopuff. Starbucks-trained baristas would prepare food and drinks inside Gopuff’s microfulfillment centers to be delivered in 30 minutes or less between 5 p.m. and 5 a.m.

Gift cards are huge

Starbucks cards were apparently a hot item during the holidays.

The company sold a record number of gift cards in the last three months of 2023, making it the second most popular gift card. Customers loaded $3.6 billion onto gift cards during the period.

Gift cards are a great business for Starbucks because they represent what amounts to an interest-free loan to the company from consumers. Those consumers then spend the gift cards at Starbucks and often go over that amount.

Speaking of gift cards

Last year, company executives promised that they would continue connecting Starbucks Rewards to other brands, much like they did with Delta’s Sky Miles program: One a financial company, another a hospitality business.

They made good on half that promise, announcing that the next partner for the loyalty program is Bank of America.

Starbucks has thrived with its loyalty members, who now number 34.3 million people and account for 59% of spending at its corporate locations. Turning occasional users—which slowed spending at Starbucks last quarter—into loyalty members is key. The Bank of America partnership could help that.

“Looking for ways to capture more Starbucks Rewards members who are not currently members like the one we just announced with Bank of America,” CMO Brady Brewer said.

The shift to cold

Over the years, Starbucks has shifted from a company that primarily sold its drip coffee and espresso-based beverages hot, to one that mostly sells highly customizable cold beverages of all kinds.

Are these cold consumers less loyal than those of us who like their beverages hot? Not so, said Brewer. “We don’t see a trade-off in frequency between cold beverage customers and hot beverage customers,” he said.

The young folks apparently like their beverages cold. “It’s really a shift in generational taste preferences where the highly frequent millennial and Gen Z customer is drinking cold coffee every day, just as people of different generations were drinking hot coffee to start their day,” Brewer said.

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