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Starbucks reveals UK expansion plans

Starbucks is betting that coffee is an indulgence austerity-era Brits are unwilling to forgo with the global coffee chain planning to open 300 new outlets in the UK over the next five years and hire 5,000 more people.

The move, which comes after an aggressive expansion backfired badly in 2008, is at odds with other parts of the food and drink industry which are being forced to pull down the shutters as cash-strapped consumers curb spending and raw material inflation eats into their profit margins.

However, Starbucks’ UK sales have grown for nine quarters in a row on a like-for-like basis – albeit the group still lost £34.2m at the net level in the year to September 30, 2010.

Its plans to open 300 new outlets, bringing the UK total to more than 1,000. Much of the expansion will be in the north of the UK.

Kris Engskov, Starbucks’ freshly-minted managing director for the UK and Ireland, reckons coffee is having its moment, just as wine did 25 years ago, where drinkers are discovering a taste for different varieties and an interest in the provenance of the product.

“This might be a better time than any [to expand],” Mr Engskov added. “Rents are coming down across the UK. If there’s anything we’ve learnt over the last few years, especially in the US, it is to invest ahead of the curve.”

Some 200 of the 300 planned new stores will be drive-through stores. While big in the US, where Starbucks has 2,500, there are now just 10 such drive-throughs in the UK but, the chain says, customers are seeking more roadside cafes.

Starbucks is teaming up with Euro Garages for the drive-through stores. The privately owned petrol station and forecourt retail group will in turn pay a royalty to Starbucks.

The UK move represents a divergence from the US where expansion most recently took the form of diversification into healthier drinks. Starbucks is paying $30m to acquire Evolution Fresh, a Californian juice maker, that it will use to open a new line of outlets focused on nutritious products.

Not all the new jobs will be full-time: the average employee works a 30-hour week, and many combine the job with college or other employment. Some 70 per cent of Starbucks’ staff are under 24 years old.


Eric D. Schwerin
Rosemont Seneca Partners, LLC
1010 Wisconsin Ave., NW
Suite 705
Washington, DC 20007
(202) 333-1880
eschwerin@rosemontseneca.com
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