Starbucks made a record $5.7 billion globally last quarter — three percent more than it made in the previous quarter; seven percent more year-over-year — which amounts to about a billion caramel Frappuccinos. A lot of that money came in the form of gift cards, and a good portion of it was a result of the sales of food, not beverages. Here are four things we learned during Starbucks’ latest earnings call, and how that'll soon trickle-down into your favorite store:
1. Yes, Starbucks Knows the Mobile-Ordering Pick-up Line Can Be Improved
Starbucks' first-quarter growth didn't quite meet expectations, but executives spun that fact by saying it was due to the success of its mobile-order-and-pay app, which the company first launched nationwide in 2015. By 2016, a full 25 percent of Starbucks’ total transactions were happening through the app. In addition, the number of stores where more than 20 percent of transactions are happening via mobile-order-and-pay at peak hours doubled to 1,200.
That sounds great. The app makes it easy for consumers to order, pay for, and pick up their drink, ostensibly skipping the line. The trouble is this system has created a new queue: The pick-up counter, or what Starbucks refers to as the hand-off plane. “When a customer walked into a store [in the past] they would look at the cashier line,” COO and President Kevin Johnson said during Starbucks’ latest earnings call with investors. “Now when customers come into the store, they look at the hand-off plane, [because] now we have congestion there.”
So many customers are using mobile-order-and-pay that baristas can’t keep up. Either way, when customers see a long line, sometimes they turned around and walked back out the door. Starbucks says it is addressing this problem by putting new systems in place and staffing barista counters with additional employees during rush hours. It is also testing a system that will text customers when their drink is ready.
The company did not respond to questions regarding whether or not its trials of delivering coffee orders were successful or would be expanded. But apparently people are not still “pissed” about the company’s new rewards program; active memberships are up 16 percent.
2. Get Used to "Social Gifting"
Starbucks sold a record $2.1 billion in gift cards and reloads last quarter, a full 15 percent more than the company sold during holiday season 2015. The company also says that of all transactions that occur in all retail stores in the U.S., 40 percent are made using a Starbucks Card.
Consumers sent Starbucks Card eGifts (digital Starbucks Cards) to each other via the Starbucks’ app as well, which is why Johnson noted, “social gifting is the next frontier.” Starbucks continues to lead retailers in sales of gift cards and card reloads, but now the company plans to capitalize on the fact that, via its app, users can send each other money without even walking into a Starbucks location.
3. Brace for Italian Pastries
Last February, CEO Howard Schultz announced that the company was finally going to dance its way into Italy. As part of that new expansion plan, Starbucks’ Italian bakery partner Princi will come stateside. Starting at the company’s Seattle Roastery later this year, pastries designed and baked on-site by Princi bakers will be on offer to Starbucks Roastery and Reserve store customers. The company’s first standalone Reserve store opens in Chicago later this year.
4. ...and Other New Food Items
Though Starbucks killed its six-year-old Evenings program, food sales account for 20 percent of the beverage company’s total sales. The coffee giant plans to profit more from that by increasing food offerings at lunch. A new lunch menu launches at select stores in Chicago later this year as part of a trial. The company also plans to release a new gluten-free breakfast sandwich in the coming months.