Starbucks hitches ride with Safeway and Target

The coffee chain is opening more mini-cafes inside supermarkets and other stores. Smart move?

By Kim Peterson Aug 25, 2010 1:53PM
Credit: (© Michael Conroy/AP)
Caption: Customer in a Starbucks storeStarbucks (SBUX) knows more about the real-estate downturn than most chains.

A few years ago, the company's real-estate moves were brazen bordering on reckless. It opened stores within blocks of each other and expanded too quickly in underperforming areas. The economic crisis forced Starbucks to shut down 600 stores in 2008, leaving the battered company to rethink its strategy.

Now, Starbucks has seized upon a new expansion idea, one that removes much of its real-estate risk. Forget the responsibility from a stand-alone location. Why not plant more mini-cafes in Safeway(SWY) and Target (TGT) stores?

The coffee chain plans to open more "licensed stores" than company-owned stores next year, The Wall Street Journal reports. These licensed cafes are important to the company because they serve a dual purpose. In addition to selling coffee, the cafes point shoppers to the growing number of Starbucks-branded products on store aisles.

Encouraged by the success of its Via instant coffee, Starbucks wants to ramp up the number of products it sells at supermarkets and other stores. Via sales have topped $100 million in the U.S., the Journal reports. Post continues after video:
Can't blame Starbucks for seizing upon new opportunity. But is it sacrificing some principles to do so?

Once upon a time, Starbucks wanted to be a place where customers could relax with a beverage, or meet friends to chat. Sofas and newspapers were the norm. Authenticity and comfort were a priority.

It's hard to capture any of that ambiance at the Safeway near my house, where a Starbucks kiosk and two tables are sandwiched between the cash registers and the restrooms.

Is Starbucks giving up on the coffeehouse vibe? Actually, we're probably seeing a split into two types of Starbucks: The conventional, take-your-time cafe and the bustling buy-our-stuff kiosk.

The Starbucks brand may come out a little worse for the wear, but the licensed stores are helping the company fill in its revenue stream in a more dependable way.
More from MSN Top Stocks:

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.