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March 2008

News & Media

Starbucks Brews New Strategy for Sales Growth 
March 20, 2008 

SEATTLE – Among a host of changes underway at Starbucks, coffee again will be freshly ground at most U.S. locations, so that the stores smell like coffee shops again. 

Starbucks CEO Howard Schultz tried to convince shareholders that he can fix what ails the chain. In an interview with USA Today, he made clear that a key first step is grinding beans for brewed coffee, reversing the switch to sealed bags of pre-ground coffee that barely got time to breathe before use.

By mid-August, coffee again will be ground and scooped at Starbucks’s 7,100 company-owned U.S. stores. Some 50 stores have already started. The chain stopped grinding and went to pre-ground beans a decade ago to cut lines and speed sales.

Starbucks needs more coffee drinks that aren’t available elsewhere, said consultant Bob Sandelman. Schultz responded that he’s working on just that. In “the next 18 months, we’ll bring in more innovation than over the past five years.”

Shultz said the company is having success in Boston and Seattle testing a premium coffee that sells for $2.50 per cup, about a buck more than a similar cup of the regular drip coffee. “We’re going to go up in experience — not down,” he told the newspaper.

In addition, Schultz said more better-for-you items will roll out this year. “We’ve honed in on health and wellness as the place we want to go.” And Schultz already has said he’s killing the ballyhooed breakfast sandwiches and noted that he hasn’t ruled out dropping more foods.

While Starbucks may be getting rid of certain food items, the coffeehouse chain may be adding energy drinks, Schultz said. “We’re entering the energy category,” but he declined to be more specific.

Schultz also said he’ll cut the number of U.S. stores opening in 2008 to 1,175 from the 1,600 planned. But he’ll increase international openings by 75 to 975.