Starbucks has been pushing for more food income for the past year, and this is just one small step on its long road. The long-term plan for Starbucks Corporation (NASDAQ:SBUX) is to gain a bigger foothold in the lucrative U.S. food market and help it compete with other cafes like Panera Bread Co (NASDAQ:PNRA) and McDonald’s Corporation (NYSE:MCD). Based on those goals, things are looking good for the coffee retailer.
Europe vs. America
In a presentation the company gave earlier this year, Starbucks Corporation (NASDAQ:SBUX) illustrated the value that food can bring to its American business. The company presented a chart showing food sales as a portion of total store sales. On the high end, with 28% of sales attributed to food, sits France. On the low, with only 10%, China. Right smack in the middle, with 19% of sales from food, is the U.S.
That ties nicely into the difference in yogurt sales between the two continents, as well. In Europe, the per capita consumption of yogurt is substantially higher, with Americans consuming about a third of what Europeans eat. That gives Danone SA (ADR) (OTCMKTS:DANOY) a reason to support Starbucks in its quest. On top of the existing potential, Greek-style yogurt — which the two companies will be selling — is growing quickly in popularity, and now makes up 40% of U.S. consumption. Not only will Starbucks Corporation (NASDAQ:SBUX) be selling an underrepresented product, but a growing underrepresented product.
The challenge for Starbucks
Americans still see Starbucks as a place to get a cup of coffee, but not a place to get a bite to eat. Panera Bread Co (NASDAQ:PNRA) is the current go-to location for a bite and a drink. It has managed to walk the fine line between bakery and cafe, and has seen sales rise at a steady clip due to that acrobatic trick. The business grew comparable sales by 3.3% year over year in the first quarter.
Meanwhile, McDonald’s Corporation (NYSE:MCD)’s has continued to stall out. In its latest earnings report, the burger chain reported a lackluster 2.4% increase in quarterly earnings, year over year.
While there are many potential reasons for the stall, one is that the business is no longer in touch with what Americans are looking for — fresher food. That’s something that Panera Bread Co (NASDAQ:PNRA) and Starbucks Corporation (NASDAQ:SBUX) have been pushing, and both businesses have had success with their fresh lines.
For Starbucks, the challenge now is to differentiate itself from Panera. If it wants to compete, it needs to find a way to do so while still being Starbucks. Part of that differentiation can come from exclusive offerings, like the upcoming yogurts from Danone, but the company will need to do more. Food is going to be the next big thing for Starbucks, but in order to do it right, it needs to make it Starbucks food, not just food that came from Starbucks.
The article Starbucks Looks to Yogurt Deal to Expand Food Offerings originally appeared on Fool.com and is written by Andrew Marder.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends McDonald’s, Panera Bread, and Starbucks. The Motley Fool owns shares of McDonald’s, Panera Bread, and Starbucks.
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