Just recently, Starbucks Corporation (NASDAQ:SBUX) announced it new subscription strategy. Customers will subscribe to receive their Reserve Roastery, 8.8 ounce coffee bean bag for $24 a month.
Even though Starbucks Corporation (NASDAQ:SBUX) was using subscriptions as a means to attract customers towards its regular tea and coffee deliveries before too, yet the subscriptions for Reserve really did the trick. The company is now focused on its e-commerce as well as its Reserve coffee revenue streams.
Howard Schultz, CEO of Starbucks Corporation (NASDAQ:SUBX) referred to the program as a new and innovative experience in coffee. Consumers wouldn’t have to visit the Roastery in Seattle, but instead they will receive the coffee beans 3-5 days after roasting.
Starbucks Corporation (NASDAQ:SBUX) launched their new subscription initiative to counter competition in the market form small batch producers like Intelligentsia, Blue Bottle Coffee and Stumptown. These small companies benefited heavily from the increased gourmet coffee demand in the market.
Through this initiative, Starbucks Corporation (NASDAQ:SBUX) aims at strengthening its high-end coffee brand by targeting up-scale coffee lovers willing to pay premiums for the coffee beans every month. This will allow Starbucks Corporation (NASDAQ:SBUX) to reduce in-store expense not to mention, increase its e-commerce growth along with the company’s next initiative; the regular delivery of prepared drinks from its outlets starting from this year.
Coffee lovers and regular drinkers may want over 20 cups a month, as the 8.8 ounce bag produces only 20 cups of 6 ounces each. Thus if consumers bought more than one bag each month then this could double Starbucks Corporation’s (NASDAQ:SBUX) revenue stream. Even though the company roasts the subscription batches for Reserves only once every month, it may consider increasing the frequency given that the initiative really picks up consumers in the market.
Investors may want to consider Starbucks Corporation’s (NASDAQ:SBUX) stock given that it has never performed better. Sales have rose 13% while earnings improved 16% as the sales of same-stores increased 5%. The company reported its prediction of revenue growth to be around 16%-18%. It also aims at opening nearly 1,650 new outlets. All this current and future revenue growth really shows that the stock isn’t one to miss out on.
There is also a forecasted increase in coffee demand of about 25% in the coming five years as stated by the International Coffee Organization. Demands are to rise in Latin America, China and India which are the prime locations that Starbucks chose for expansion. A few industry analysts think that this increase would cause a problem as prices will increase however for Starbucks Corporation (NASDAQ:SBUX), it couldn’t get any better than that.
The company has worked through thick and thin to make its brand recognized worldwide as consumer’s number one choice for coffee. Its Reserve Roastery initiative should help strengthen its brand more as consumers are bound to take an interest given the demand in the market. This shows that the company isn’t going anywhere anytime soon as much of the market is still in its firm grasp.
