Starbucks Corp., the world’s largest coffee-shop chain, will purchase San Francisco-based Bay Bread LLC for $100 million in cash in an effort to boost the number of its non-coffee offerings. The purchase includes 19 retail locations and the brand name La Boulange.
La Boulange products are sold at San Francisco area grocery stores, hotels and restaurants, with products including French style bread, homemade granola and flank steak sandwiches.
Starbucks plans to eventually expand the La Boulange chain nationwide and may offer some products for sale in grocery stores. Starbucks also hopes to bring a French bakery experience to customers visiting its own cafes, starting early 2013 in the San Francisco area.
The sale is expected to close before September. 30, which is the end of Starbuck’s fourth quarter. Current Bay Bread owner Pascal Rigo will become senior vice president and general manager of La Boulange when the deal is finalized.
Starbucks Working On Food Offering
Food is Starbucks’ weakest product line; food makes up 19% of sales or $1.5 billion annually, but only 33% of drink purchases also include food. Food items sold at Starbucks include scones, wraps and salads supplied by local vendors.
Expanding the food menu will allow Starbucks to compete against food chains. Problem is, Starbucks cafes don’t have kitchens. Its largest competitor is Panera Bread, a fast-growing chain which offers salads, sandwiches and fresh baked bread.
Industry analyst Sara Senatore told Reuters, "Their food has always been the thing that people have complained about. The question investors will ask is: 'Is this the best way to do it?'"
In a conference call with analysts, Starbucks CEO Howard Schultz said he believes the La Boulange products will attract more customers, boosting food and beverage sales. Starbucks cafes will be presenting food differently than they have in the past, Schultz said.
Bay Bread marks Starbucks’ largest non-coffee purchase. In November, it purchased Evolution Fresh Inc. for $30 million and opened its first juice bar in March.
Starbucks owns the Ethos water brand and the Tazo tea brand. In March, the company announced it will sell an energy drink called Refreshers.
Key Statistics - Global Bakery Industry (source: MarketLine)
- It is forecasted that the global bread and rolls market will be valued at over $174 billion in 2014 for an increase of nearly 12% over 2009.
- It is forecasted the global bread and rolls market will have a volume of 76 million kilograms in 2014 for an increase of 3.5% from 2009.
- The largest segment of the global bread and rolls market is artisanal bread and rolls, which accounts for 52% of market value.