Starbucks FY 3Q15 Earnings Call Notes

23 million more customer occasions than the year before

” Starbucks third quarter of fiscal 2015 stands as among the most remarkable quarters in our over 23 years as a public company. Our global comp store sales grew 7%, driven by a stunning 4% increase in global traffic. Let me put that 4% traffic increase figure into perspective. A 4% increase in global traffic on a business of our scale translates into having served over 23 million more customer occasions in Q3 of 2015 than in Q3 of 2014 or an average of approximately 25 more customer occasions every day from every single store in our nearly 10,000 store global comp base.’

Many retailers have responded to digital by just increasing their digital budgets, driving up customer acquisition costs

“many traditional retailers and consumer brands have responded simply by substantially increasing their digital advertising budgets, significantly driving up their cost of customer acquisition and producing little to show for it. We on the other hand, took a very different approach.””

Partnership with Spotify, Spotify buys rewards to Starbucks for its customers

“The first partnership we announced was with Spotify. Under the arrangements, Spotify will purchase Starbucks Stars from us and then distribute these Stars to drive premium subscriber acquisition. It will allow Spotify to differentiate themselves from competitive music streaming services and reward customer loyalty. In addition and as an added benefit to our own employee partners, all Starbucks partners are being given a Spotify premium account free of charge.”

Try to get food to mid 20% in terms of mix and rolling out evenings: beer and wine

“We said in the analyst conference at the end of last year that we would see our food mix growing up to the mid 20s% in terms of percentage of mix, and I think that feels like a good place directionally. We are now up to 20%. We’ve seen a 1 point increase in the mix. So directionally heading that way and we have a good line of sight on it.

Evenings we have rolled out the Evenings program to stores across different parts of the country. We are still in the early phase. We will see the expansion of Evenings to hundreds of stores in the US over the next 12 months.

And that again gives another opportunity but only to introduce wine and beer, but to strengthen our food offering to be part of that Evenings software complemented by teas, coffees and a range of beverages.”

We are not reaching a saturation point in the US yet

“I think you would all agree that unequivocally we have proven and demonstrated that anyone who a year or two or even three thought that Starbucks might be achieving a level of saturation in the US or North America is clearly not the case.”

We’re a long way away from our unit volume ceiling

“I can’t give you the specific number, but I can tell you that we believe that we are a long way from the average unit volume of a Starbucks store achieving its ceiling. And I think one of the unique strengths that we’ve developed over the last couple of years is being able to identify need states and then to link that need state with the right product made for our customers in a customized fashion.”

We’re leveraging the fixed asset that we have now

“There was a time when Starbucks’ entire business pretty much happened 70% to 80% of it before noon. Well, that’s not the case today. What’s happening today is that we have identified, developed and executed against the strategy of leveraging the fixed asset we have throughout the daypart by creating need states products, and now we’re going to extend that to evening.”

The thing we have done really well is stay small while getting big. It’s about local relevancy

“I think the thing we have done really, really well and it’s quite a challenge is, how do you get big and stay small? How do you maintain intimacy and trust with your customers and your brand when you are as ubiquitous as Starbucks has become? And the way you do that is through local relevancy and the kind of product design and experience that we’ve now been able to create around the world.”