NEW YORK — Starbucks Corp. is hoping its Seattle’s Best Coffee chain will use its milder beans and broader choice of food items to become a growth engine during the recession.
Even as Starbucks shutters hundreds of namesake locations, cuts jobs and shaves other costs, it is seeking franchisees to open new cafes and kiosks of Seattle’s Best Coffee nationwide.
Since Starbucks took over the chain in 2003, most new Seattle’s Best Coffee cafes have opened inside Borders bookstores and kept a relatively low profile. Many consumers don’t know there’s a connection.
Not only could opening more franchised cafes help Starbucks expand without increasing its operating costs, but promoting Seattle’s Best Coffee also could help Starbucks pursue two distinct streams of the coffee market simultaneously.
Seattle’s Best Coffee’s food, including ice cream and hot sandwiches, targets a broader market than the pastries and sandwiches and high-end juices and protein drinks at most Starbucks. And its much milder beans have been available since January in more than 2,800 Subway restaurants.
“It gives them an opportunity to reach out to a different audience,” analyst Darren Tristano of Technomic Inc., a food industry consulting firm, said of the plan to open more Seattle’s Best Coffees.
Starbucks says the slightly lower prices and milder taste of Seattle’s Best Coffee make it an especially viable vehicle for growth now, though the company declined to say how many new stores it hopes to open or where.
“We believe that the Seattle’s Best Coffee brand can play a unique role in helping capture a larger share of the coffee segment by providing options and a variety to a broader spectrum of customers,” Starbucks Chief Executive Howard Schultz said in January when he announced the plan.
There are roughly 550 Seattle’s Best Coffee locations nationwide, including 12 stand-alone cafes, compared with 9,000 company-operated Starbucks stores and some 7,000 licensed stores in locations like hotels and airports.
Most Seattle’s Best Coffee revenue is counted in the 16 percent of Starbucks Corp. sales from “specialty operations,” which also includes revenue from distributing Tazo Tea beverages in the U.S. and Canada and sales from a bottled coffee drinks joint venture with PepsiCo Inc.
So analysts said it’s unlikely that adding Seattle’s Best Coffee cafes will make much difference in Starbucks overall revenue. But it certainly could be helpful and might even create a candidate for a spin-off that could increase the company’s cash reserves in the future.
“It gives them a secondary strength,” Tristano said.
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