Starbucks expands brand in supermarkets

Gerry Lopez, president of Starbucks' consumer products group, said the company is still far from maximizing its opportunities to sell the coffee chain's branded goods to outside retailers. He plans to expand the Starbucks brand by selling products such as coffee beans, ice cream and chocolate in supermarkets and convenience stores, in addition to its online store.

The challenge, of course, will be to accomplish this without diluting a brand strong enough to drive people to pay a premium price for a cup of coffee. As consumers become more educated about a product category like coffee or wine, they often consume more premium brands.

"Given the option for quality, people will exercise it. We are proof of that," said Lopez. In line with that thinking, Starbucks said it plans to start selling "Limited Reserve" coffees in US supermarkets. It will offer bags of rare coffee beans from high-end farms in Asia, Latin America and Africa. Starbucks said it can sell its coffee beans at more than three times the price of mainstream brands.

Packaged coffees account for about two-thirds of the consumer products group's revenue, which reported a 24% increase in net revenue to US$87.1 million in the quarter ended July 1. The segment accounts for nearly 20% of Starbucks' total operating profit.

The coffee chain said mainstream US coffee brands like Folgers, manufactured by Procter & Gamble, and Maxwell House from Kraft account for about 50% of supermarket coffee sales. Starbucks sold 25.4 million kg of packaged coffee at supermarkets and other retailers last year. It sells packaged coffee with joint venture partner Kraft Foods Inc., accounting for about 4% of US market share.

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