Starbucks opened its Reserve Roastery and Tasting Room in Seattle two years ago as the first step toward creating a premium coffee brand. Roastery sales are up 24 percent in fiscal 2016 over the previous year and the average Roastery customer spends four times more than at a typical Starbucks store, CEO Howard Schultz said. By pursuing luxury buyers to offset slowing growth in U.S. stores, Schultz said the Seattle coffee company’s goal is to build a new premium brand much like fashion and automobile companies have done.
“I think a good analogy is what Nike’s been able to do with Air Jordan,” Schultz told analysts while discussing the most recent financial results. “That is build(ing) a profit center and a sub-brand that unto itself is a growth engine and, as a result of that, shines a halo on the entire company.” The Seattle Roastery’s success is proof that the new concept can grow the company, Schultz said. He sees an opportunity to eventually have as many as 30 locations in influential cities around the world. Starbucks has already announced plans to expand its premium Roastery brand in Shanghai, New York City and Tokyo in 2018 as well as a Roastery scheduled to open in an unidentified European city in 2019. Starbucks also plans to open 1,000 or more Starbucks Reserve stores and have Reserve espresso bars – an espresso bar that makes coffee in a variety of different brewing methods – in 20 percent or more of existing and new Starbucks stores, Schultz said.
Prices are more expensive for drinks made with the Roastery’s Reserve coffee such as the new Nitro nitrogen-infused cold coffee and the Affogato, which is ice cream infused with espresso. Schultz said Roasteries, Reserve stores and “the premiumization of the Starbucks experience” will be his personal focus to set up Starbucks (Nasdaq: SBUX) for long-term growth and success. “I am reminded of early days at Starbucks when we could foresee the transformation of coffee consumption that started in Seattle and spread all over the world,” he said. “The scale of the opportunity, the confidence in our capability and the early validation we have all point to the next wave of growth for our company.”