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Starbucks lays out growth plans

Strategy calls for more retail products, multi-daypart sales, overseas expansion

Starbucks outlined growth plans Wednesday that call for expanding its consumer packaged goods on a global scale, building multi-daypart sales in its coffeehouses and accelerating international openings.

At an investor conference in New York, Starbucks chairman, president and chief executive Howard Schultz also added fuel to growing speculation that the Seattle-based coffeehouse giant would achieve some of its goals with the help of new acquisitions.

Schultz reportedly told investors Wednesday that the company would look at possible purchases “large and small” as it builds its consumer packaged goods business — though Schultz did not directly comment on speculation by analysts earlier this week that Peet’s Coffee & Tea could make a good partner for Starbucks after its planned breakup with Kraft Foods Inc.

EARLIER: Analyst: Starbucks eyeing Peet's

Starbucks said last month that its 12-year distribution agreement with Kraft would end in March 2011, but Kraft is challenging the terms of the split and initiated arbitration proceedings Monday.

Meanwhile, Starbucks said this week that it plans to take on distribution of its bagged coffees and Tazo tea products with the help of Jacksonville, Fla.-based Acosta Sales & Marketing as a broker. Acosta helped Starbucks build its sales of the new VIA Ready Brew instant coffee to about $135 million in its first year.

On Wednesday, Jeff Hansberry, president of Starbucks’ global consumer products and foodservice division, said in a statement the company is building up the consumer packaged goods, CPG, part of its business.

“By reaching customers in the most agile and efficient way across all categories, channels and markets, Starbucks CPG business is becoming a high-profit, important and growing business, with global scale for Starbucks,” Hansberry said.

In addition to its bagged coffee for both the Starbucks and Seattle’s Best Coffee brands, the company said it will continue to expand Seattle’s Best Coffee as a stand-alone retail brand. Starbucks said it has opened the first Seattle’s Best Coffee Bar as a pilot in Walmart Canada Supercenters.

Though the pace of new store openings for Starbucks’ namesake stores in the United States is expected to remain slower than in the past, Cliff Burrows, president of Starbucks Coffee U.S., said growth would be achieved from the existing 11,131 domestic locations by increasing capacity, expanding dayparts and experimenting with new concepts.

The company has been trying out beer and wine sales and an expanded food menu in some test locations to increase evening sales, for example. Burrows also said the chain’s loyalty program, My Starbucks Rewards, and the newly launched in-house digital network have also helped create capacity at peak hours and capture more dayparts.

On Wednesday, Schultz also reiterated earlier statements about international growth, saying new openings would accelerate in both established markets, such as Canada and Japan, as well as new and emerging markets of China, Brazil, India and Russia. Currently, the chain includes 5,727 international units.

John Culver, president of Starbucks Coffee International, said, “We are particularly pleased with the response we’re seeing from our Chinese customers, and expect to operate at least 1,500 Starbucks stores in Mainland China by 2015.”

Schultz said the plan was all part of an effort to capture a greater share of the $145 billion world coffee market.

“We are building a solid and secure foundation for profitable growth in both new and existing businesses,” he said. “Our next phase of growth will come from extending the Starbucks Experience to our customers beyond the third place to every part of their day, through multiple brands and channels.”

Contact Lisa Jennings at [email protected].

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