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Starbucks News: $10 Coffee, Its Next Five Years, Princi is a Go

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As Starbucks (SBUX - Free Report) co-founder Howard Schultz steps down from his role as chief executive officer, he will shift his focus to building up the company’s “Reserve” brand stores. The goal is to have as many as 30 Reserve Roastery and Tasting Rooms in big cities all over the world, in addition to the flagship Reserve in Seattle.

Starbucks has added Reserve bars to some locations already in New York City. According to CNBC, one such café in Manhattan’s Upper East Side offers a $10 cup of coffee brewed in glass siphons, $10 “flights” of Reserve brews, and nitro cold brew, which is coffee that has been infused with nitrogen gas, making it creamier and richer than regular iced coffee.

These Reserve rooms are an answer to the growing competition of boutique, upscale coffee chains like Intelligentsia and Blue Bottle, where prices are set slightly higher than a normal Starbucks menu. For instance, a 12oz latte at an Intelligentsia CoffeeBar goes for around $4.50, whereas Starbucks charges $3.25. Thus, Reserve Roasteries have some room to play round with higher prices.

Starbucks’ Reserve stores—and any $10 coffee menu item—will probably be a success. The company was the first to introduce the world to high quality coffee, and many people will likely continue to spend a lot of money on coffee going forward.

Its Next Five Years

Speaking at the company’s bi-annual investor presentation in New York City, Schultz announced financial targets for Starbucks for the next five years. The plan includes revenue growth expectations of 10%, earnings growth in the range of 15%-20%, and mid-single digit comparable sales growth at existing store locations for each year.

“If Starbucks were a 20-chapter book, I still think we are in chapter four or five…Our industry-leading pipeline of innovation is more robust than ever,” commented Schultz.

New store openings will help this growth projection. Starbucks currently has around 25,000 stores today, and sees expansion by another 12,000 by 2021. Stronger new-store performance in the U.S., brand awareness, and mobile driving traffic should all contribute to this aggressive and robust five-year plan.

Princi is a Go

Earlier this summer, Starbucks announced its investment in high-end Italian bakery and pizzeria chain Princi, and on Wednesday, Schultz confirmed it. The deal allows Starbucks to develop and operate all new Princi locations outside of Italy and in the U.S. Rocco Princi founded the bakery and café in 1986, and today, it operates just five locations in Milan and London.

The first Princi locations will be in Seattle, Chicago, and New York City, and by next year, Starbucks Reserve stores will begin serving Princi baked goods. There will be ovens used to bake breads on-sight, as well as bakers who will work solely with food and baristas who will remain solely focused on coffee. The company is even developing a special coffee designed to pair specifically with Princi foods.

This partnership with Princi will help Starbucks boost its food sales, a quickly growing facet of its business that has yet to fully blossom. In the past, Starbucks’ food had drawn complaints about taste and consistency, and its acquisition of the La Boulange brand in 2012 helped the company turn around its food business. The Princi deal should enhance it even more.

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