Starbucks cashes in on revamped offering

Starbucks is extracting more money from customers with offerings like a flat white and revamped baked goods that cost a little more.

The Seattle-based chain reported a higher quarterly profit on Thursday, with sales jumping seven per cent at established US stores.

The company said much of the increase came from higher spending per visit.

New drinks like the flat white and Teavana Shaken iced teas help drive up sales because they’re a little pricier than other drinks, Starbucks CFO, Scott Maw, said.

He noted the company is also charging more for baked goods like croissants, which are being made with new recipes.

“What we’re seeing is a premiumisation, a trade up,” Maw said.

In a conference call with analysts, CEO Howard Schultz, said the flat white and new cold brewed iced coffees also help extend the company’s position as a “coffee authority”.

During its second fiscal quarter, Starbucks said its US sales bump was also helped by a two per cent uptick in customer traffic, which translated into an additional 10 million visits.

That was driven in part by people coming in to redeem the US$1.6 billion (A$2.06 billion) that was loaded onto gift cards during the holidays.

The company is also convincing people to buy more food in general.

Overall Starbucks food sales in the US were up 16 per cent from a year ago, while breakfast sandwich sales were up 35 per cent, the company said.

A key part of Starbucks’ strategy for continuing to drive up sales is its expansion into the afternoons and evenings, when its stores tend to be less busy.

Already, Starbucks says about a third of orders include a food item and that the figure has been ticking higher.

The company is also testing a program in about 30 locations where it sells alcohol in its cafes in the evenings, and has said plans to expand that more broadly this year.

Globally, sales at established locations rose seven per cent during the period.

That included a 12 per cent increase in Asia, while the unit encompassing Europe, the Middle East, and Africa rose two per cent.

For the period ended March 29, Starbucks’ profit jumped 16 per cent to US$494.9 million, or 33 US cents per share, which was in line with expectations.

Total revenue rose 18 per cent to US$4.56 billion, more than the US$4.53 billion Wall Street expected.

Shares of Starbucks Corp were up 4.3 per cent at US$51.54 in extended trading.