One way to grow sales is to open more stores. But Starbucks has nearly reached saturation on that path, so it is taking a new approach, by seeking to get its existing customers to visit the same stores, just at different times. Whereas early morning hours are nearly always busy—more than half of all consumers visit their local coffee outpost before 11:00 a.m.—Starbucks perceives plenty of room for growth at the lunch hour.

Accordingly, the coffee chain is expanding its menu, focusing mainly on food items that can satiate a hungry consumer on her or his lunch break. The new menu, currently available on a test run in about 300 stores in Chicago and Seattle, takes the name Mercado, which means “market” in Italian. With 18 items, both hot and cold, the new menu revolves around sandwiches and salads.

Of course, this is not the first time Starbucks has played around with its food menu. It expanded its pastry offerings and purchased the San Francisco–based pastry company La Boulangerie to supply stores nationwide. In international operations, Starbucks also has invested heavily in an Italian baker called Princi and plans to add its products to stores in Italy and China.

Despite some missteps that prevented wider rollouts of food items, Starbucks confirms that food now accounts for approximately 20 percent of its sales. It also has a program in place to donate any unsold food at the end of the day to the Feeding America charity, a program that will apply to its Mercado menu as well.

But more food also means more work for employees, who must ensure not only that the latte has the right amount of foam but also that the tahini salad is fresh. Such expanded operations also could be challenging for smaller stores, which may lack the storage or kitchen facilities needed to support such a relatively extensive menu.

Discussion Question:    

  1. Is Starbucks expanding its variety, its assortment, or both?
  2. What other restaurant chains have successfully pursued a strategy similar to the one that Starbucks is trying now?
  3. What are the advantages and disadvantages of Starbucks’s new strategy?

 Source: George Anderson, Retail Wire, September 21, 2017