Is Starbucks Transforming into a Complete Beverage Brand?

In an effort to differentiate itself further from McDonald’s (NYSE:MCD) and Dunkin’ Brands (NASDAQ:DNKN), Starbucks (NASDAQ:SBUX) recently announced plans to sell beer and wine in as many as 12 cafes in Atlanta and Southern California by the end of 2012.  Starbucks launched alcoholic beverages in a Seattle cafe in 2010 with success, and now offers the beverages in five Seattle-area stores.  The announcement is Starbucks’ latest move to transition itself from the world’s biggest coffee chain to a complete morning-to-evening beverage brand.

In November, Starbucks announced it will enter the juice market after purchasing Evolution Fresh for $30 million in cash.  Starbucks will begin to open juice bars this year on the West coast that will serve premium juice products.  Evolution Fresh products will replace PepsiCo. Inc.’s (NYSE:PEP) Naked brand juices in coffee houses.  While Starbucks‘ coffee and juice beverages attract the morning and afternoon crowd, its venture into the alcohol sector seeks to capture the evening the crowd.

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“As our customers transition from work to home, many are looking for a warm and inviting place to unwind and connect with the people they care about,” Clarice Turner, Starbucks’ senior vice president for U.S. operations, explained.  “We’re pleased with the response of our customers to the introduction of wine, beer and premium food at several of our stores in the Pacific Northwest, and we’re excited to see how the idea translates to other markets.”

The alcohol market has huge potential for Starbucks.  According to a recent report by the Centers for Disease Control, about 17 percent of the US population binge drinks at least four times a month.  The average number of drinks during each sitting is eight.  Although Starbucks does not plan on offering alcoholic drinks in all of its 17,000 cafes around the world, the move will likely broaden its appeal to customers and give sales a boost. Beware Anheuser-Busch (NYSE:BUD), Sam Adams (NYSE:SAM) and Constellation Brands (NYSE:STZ).

Starbucks transformed the coffee industry by making their stores trendy.  If the company succeeds again, it may transform the drinking industry and make Starbucks a major player in the beverage industry.  In addition to drinking a Starbucks’ product for morning or lunch, its cafes could also become the place to unwind at the end of the day.  The wines and beers offered at Starbucks will be hand-selected to reflect local preferences.  Starbucks will also offer evening snacks such as cheese plates and hot flatbreads.

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To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com