The last quarter of 2014 was the holiday season when many retailers found it hard to attract customers to their stores. Business was dull overall this season. However one company made the most of the holiday season and reported record sales during last quarter. It was the coffee giant, Starbucks (SBUX, Financial). This one quarter alone saw its customer transactions increase to 12 million. The performance during Q3 2014 was not so great and the management of Starbucks took lots of initiatives to bring back the progress on track and was immensely successful in its efforts. What strategies did it employ to achieve success? Read on to know more.
Gift cards galore
One of the most successful efforts that Starbucks undertook during the holiday season of last quarter of 2014 was to sell loads of gift cards to its customers. In Q3 2014, one in 8 Americans had a Starbucks gift card. This statistic changed during the last quarter of 2014, when one in 7 Americans had a gift card. In addition to this, close to $1.6 billion was reloaded into the existing cards, which helped Starbucks report a 17% increase in gain from last year’s figures. A whopping 1 million customers were added this quarter alone in the rewards program. Currently, the number of subscribers in this reward program stands at an impressive figure of 9 million. This reward program generated lots of earnings for Starbucks which puts it at a strong position in the long term.
New drinks do the trick
What is the secret behind Starbucks recording a 9% increase in business just for the fourth quarter of 2014? The answer is clear – innovation. Starbucks had shown the world how creative it could get with its Pumpkin Spice Latte recently. And during the last quarter, it blew away customer’s expectations with yet another new drink, Chestnut Praline Latte. The highlight of this drink was that it instantly stuck a chord with its customers and was termed as “bull’s eye” by Wall Street big wigs, because it was yet another interesting product from the stable of Starbucks that had the potential to bring good business. The other big source of revenue for Starbucks was from its tea segment. Revenues from tea sales had climbed by 20% in a single quarter and the values are expected to touch the magical mark of $5 billion in the next five years. The stock movement of the company for the last few months is shown below. It is evident from this that the prices had gone up during the last quarter.
Untapped potential in the “lunch segment”
Starbucks’ entry into the food sector was given a warm welcome by its customers during the last quarter of 2014. Revenues from the food segment alone saw a 30% increase for Q4 2014. Starbucks tasted big success with its breakfast sandwiches; hence it ventured into lunch options as well. Currently the management of Starbucks understands that there is a huge market here to tap as the market share of the company in the lunch sector is only 2%. The company is planning to concentrate on this segment more and earn at least $1 billion worth of revenues in the next five years. By 2015, the EPS of Starbucks is expected to go up to $3.13 per share. Starbucks has truly capitalised the holiday season to the maximum extent possible by dwelling into newer businesses and better strategies.
Conclusion
Starbucks is one of the few companies in the market that knows to spot a favorable situation. With newer products expected to be launched this year, it is all set to gain a bigger and better market share in its food segment as well. Being the beverage giant already, diversification into the foods section is only going to bring a world of good for the investors of Starbucks.
