Starbucks to Invest $275M in Partners and Digital

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Starbucks to Invest $275M in Partners and Digital

By Jamie Grill-Goodman - 01/22/2016
In quarter one, Starbucks delivered a 12% increase in revenue to a record $5.4 billion, despite the significant investments the company continues to make in its partners and its business. Starbucks expects investments in its partners and digital initiatives to total between $275 million and $300 million globally in 2016 compared to approximately $145 million in fiscal 2015.

Quarter one was also Starbucks' third sequential quarter of a 4% increase in global traffic. This holiday season, the company offered Holiday Spice Flat White and an expanded holiday food platform. It also leveraged its digital assets to reward loyal customers with five specialized Very Monday offers throughout the holiday season. Those offers, combined with the Starbucks for Life sweepstakes, open only to My Starbucks Rewards (MSR) members, drove customer traffic and increased MSR loyalty membership. The company increased the number of active MSR members in the U.S. to 11.1 million, up 23% over Q1 last year. 

"You've got to ask yourself what's going to happen to the future of many of those malls that are anchored by those big-box retailers," CEO Howard Schultz said, commenting on the recent news of Macy's and Walmart store closures. "Having said that, the investments that we made in our partner investments, which is store execution and retention of our people and the intimate relationship we have with the customer, coupled with the technology investments which have been significant, put up 4% traffic in this environment when there isn't a retailer in the country that is putting up anything close to 1% or 2%, let alone 9% comps in the quarter in the U.S. business, and we finished very strong for the quarter."

The company said technology innovation is further strengthening its brand, improving its efficiency and in-store execution, increasing profitability and enabling the company to deliver an elevated Starbucks experience to its customers, particularly to Millennials.

"By anticipating and investing years ahead of the mobile technology curve, Starbucks today is redefining the customer-facing and partner-facing mobile and retail experiences of the future," said Schultz.

One of those mobile experiences is the Starbucks mobile app. In the quarter, over 21% of total U.S. transactions were paid using the mobile apps and the company said it is seeing further acceleration in the month of January. Over 1 million customers in the U.S. used Starbucks' mobile order and pay capability in the month of December and those customers averaged approximately five mobile orders in the month.

"Usage of mobile order and pay is growing and we are now processing over 6 million mobile order and pay transactions per month," said president and COO Kevin Johnson. "In many of our busiest stores where morning peak demand is high, mobile order and pay exceeds 10% of total transactions."

According to Johnson, the company is expanding its digital agenda across four key pillars:

1.   Delivery: Starbucks is extending Mobile Order & Pay to include a delivery option for customers. Pilots are underway in Seattle and New York City.

2.       Personalized Offerings: The company has invested in technology to help better personalize the offers it makes to loyalty customers.

3.       Global Deployment: Starbucks is committed to leveraging these digital experiences in its major company-operated markets and with its licensee partners.

4.       Digital Media: The Spotify music capability Starbucks recently launched is one example of an integrated digital media experience. The company plans to explore additional digital media scenarios that are "entertaining and interesting" to consumers and that align with the Starbucks brand.

In 2016, Starbucks will also be enhancing the Starbucks Rewards program enabling  loyalty customers to earn stars in many new ways.