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Starbucks announces strategic priorities to accelerate growth

From the July 2018 issue.

Starbucks Corporation has announced a set of strategic priorities and corresponding operational initiatives to accelerate growth and create long-term shareholder value.  

Starbucks has detailed three strategic priorities to regain revenue and earnings momentum: accelerating growth in the US and China, the company’s targeted long-term growth markets; expanding and leveraging the global reach of the brand through the Global Coffee Alliance; and sharpening the focus on increasing shareholder returns.

“While certain demand headwinds are transitory, and some of our cost increases are appropriate investments for the future, our recent performance does not reflect the potential of our exceptional brand and is not acceptable,” says Kevin Johnson, Starbucks President and Ceo.

“We must move faster to address the more rapidly changing preferences and needs of our customers. Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organisation and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value.”

The company’s streamlining initiatives will enable greater agility in adapting more quickly to changes in consumer preferences. This includes accelerating product innovation around core beverages while leveraging the growing tea and refreshment category, as well as consumer behaviour trends towards health and wellness.

Starbucks is optimising its US store portfolio at a more rapid pace in FY19, including shifting new company-operated store growth to underpenetrated markets, slowing licensed store growth, and increasing the closure of underperforming company-operated stores in its most densely penetrated markets to approximately 150 in FY19 from a historical average of up to 50 annually. 

Starbucks is actively expanding the breadth and depth of digital relationships with current and new customers. The company has added 5 million new digitally registered customers since April 2018 and 2 million active Starbucks Rewards members year-over-year to 15 million, up 13 per cent from the previous year.

Starbucks continues to make progress toward closure of the Global Coffee Alliance transaction with Nestlé to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods and Foodservice, adding opportunity for another 5 million points of presence in 189 countries.

With the execution of the company’s strategic priorities expected to improve the return profile of the business, the company now expects to return approximately $25 billion in cash to shareholders in the form of share buybacks and dividends through FY20. This represents a $10 billion increase from the cash return target announced on 2, November 2017.

Starbucks management further discussed updates at the Oppenheimer 18th Annual Consumer Conference in Boston in June.

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