We believe our recent slower comp growth, while still very healthy, reflects some internal challenges our stores are facing with meeting customer demand for cold blended beverages. Currently, we are experiencing stronger than expected -- it is actually unprecedented -- customer demand for blended beverages during morning peak hours. While we have made tremendous progress on our service with speed initiatives during our peak espresso periods, we still have work to do with service efficiencies around our Frappuccino blended beverage preparation.
Last year we spoke to you about the growing popularity of our blended beverages. In fact, during our Spring and Summer 2006 promotional periods, we introduced a number of new and exciting blended beverage offerings which have been very well received. In light of the increasing demand for our blended beverages, we have recognized the opportunity to refine and improve our Cold Beverage Station to make drink preparation more efficient and improve service over time but, in retrospect, we did not move aggressively enough.
Currently, we have deployed the Cold Beverage Station to 1,070 locations -- about 18% of our company-operated locations in the U.S. and Canada. This is one example of how we are beginning to make progress toward increasing service efficiencies in this category.
What is key here is that blended beverage sales are showing strong growth, but we are experiencing the softest overall comparable transaction growth in stores with the highest blended sales. Because of this, we believe we are losing some espresso business due to longer than normal wait times, in both cafes and drive-thru’s during peak morning hours.
It is also possible that we are not maximizing the blended beverage business due to this capacity constraint.
We believe that our July comparable store sales growth is under pressure because we are challenged to meet customer demand for our Frappuccino beverages. Customers are embracing these cold blended beverages as a morning staple to a degree that we had not anticipated, and it is clear to us that the opportunity for improvement remains in our control.
We recognize the opportunity ahead of us and we know what our challenge is. That is to take the efficiencies and learnings from stores providing the best service with speed during periods of peak customer demand for cold beverages and applying them broadly to our company-operated stores across the U.S. and Canada.
These learnings include equipment improvements, ergonomic engineering, more effective labor deployment and partner training. We know it is not just our job to create customer demand through innovation, we also have to satisfy that demand and we are actively working to alleviate new capacity constraints that develop as our business grows.
Starbucks Comments On Frappaccino Wait Times Hurting Its Sales Growth
Aug 3 2006, 05:46 | about: SBUX
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On the Starbucks Corporation (SBUX) earnings conference call held last night, CEO Jim Donald explains one reason why the company's same-store sales growth came in at the low end of estimates (the stock dropped 9% after hours):