Starbucks will face hefty competition in the baked goods arena: Analyst
The Starbucks Coffee Company acquired US bakery firm Bay Bread and its La Boulange brand for US$100m at the beginning of June.
The coffee titan said its initial priority was to move the French bakery brand into Starbucks stores across the US and then expand La Boulange Cafés. However it detailed its future aim would be to shift the brand into the CPG arena in US retail outlets.
Elizabeth Friend, consumer foodservice industry analyst at Euromonitor, said however that this shift is a long way off.
“It is not likely something Starbucks will be focusing on in the near-term,” Friend told BakeryandSnacks, and when this shift does occur, the coffee firm will be faced with stark competition from “much-larger CPG players with vast resources and connections in grocery.”
“This will pose a whole set of challenges in terms of pricing and distribution,” she said.
“It remains to be seen exactly to what extent Starbucks will pursue to CPG angle,” she added.
In all growth plans – the immediate incorporation of La Boulange in Starbucks’ stores and entering the CPG category – the coffee firm should focus on the specialities of the French bakery brand; its high quality ingredients and local sourcing.
The long-term and short-term
In a conference call following the buy, Howard Schultz, president and CEO of Starbucks, made clear that the shift into the CPG category would not happen until it had built up national distribution of the French brands in Starbucks stores.
Friend supported this business tactic, as until an established customer following has been created at national level, entering into the CPG category will be extremely difficult.
Cliff Burrows, president of Starbucks America said, that the La Boulange buy has created a hybrid business model.
This means that production capacity has been acquired and Starbucks will be leveraging outside suppliers to combine in-house capabilities and external production expertise, Burrows said.
Starbucks is positive the move holds many short-term and long-term growth opportunities, the firm said.