Bloomberg News

Starbucks to Sell Greek Yogurt as Schultz Pushes Into Groceries

July 23, 2013

Coming soon to a Starbucks near you: Greek yogurt.

In a partnership with Danone SA (BN), the world’s largest coffee shop operator will start selling the dairy product in its cafes next year and in food retailers in 2015. The plan helps address two of Chief Executive Officer Howard Schultz’s key concerns: offering healthier fare and helping Starbucks Corp. colonize the grocery store.

“Starbucks is venturing into becoming a house of brands,” similar to Procter & Gamble Co. (PG:US) and Unilever, Bill Chidley, senior vice president at Interbrand Design Forum in Dayton, Ohio, said in an interview. The move is risky, he said.

“When you start to get too diverse with your portfolio, investors just have a hard time characterizing what you are,” Chidley said. “Are they a house of brands or are they about beverage experiences?”

Starbucks has steadily been moving into the grocery business since 1995, when it began selling ice cream in such flavors as java chip frappuccino and caramel macchiato. It has since added packaged coffee, Tazo brand tea and Via instant packets. Since wresting control of Starbucks (SBUX:US)’ supermarket business from Kraft Foods Inc. in 2011, Schultz has accelerated his rollout of new items into grocery stores with Keurig K-Cup pods, Evolution Fresh juice and Refreshers energy drinks.

Danone, the Paris-based maker of Oikos and Activia brand yogurts, will make the new products for Starbucks, which will be branded “Evolution Fresh, Inspired by Dannon.” The financial terms of the partnership weren’t disclosed. Starbucks bought juicemaker Evolution Fresh in 2011 for $30 million in cash before snapping up Teavana Holdings Inc., whose products it also plans to sell in grocery stores.

Grocery Expansion

Starbucks’s grocery business has been expanding faster than its cafe sales. In the year ended in September, revenue (SBUX:US) from selling items in supermarkets and other retailers jumped 50 percent to $1.29 billion, according to a filing with the U.S. Securities and Exchange Commission. Total revenue that same year increased 14 percent to $13.3 billion.

The shares fell 1.2 percent to $68.19 at 12:02 p.m. in New York. They had gained 29 percent this year through yesterday, compared with a 19 percent increase for the Standard & Poor’s 500 Index.

Starbucks will start selling Greek yogurt parfaits in its company-owned U.S. stores next year. The coffee-shop operator is considering selling the yogurt internationally and may create other foods with Danone, said Jim Olson, a Starbucks spokesman.

Big Step

“This is really the next big strategic step in our health and wellness evolution,” he said.

Sales of yogurt are increasing -- even more so for the Greek variety. Greek-style yogurt sales in the U.S. surged 48 percent to $2.65 billion in the 52 weeks ended June 8, according to data from Nielsen. Sales of all yogurt increased 6.1 percent to $6.3 billion during the same time, the data show.

Chobani Inc., General Mills Inc. (GIS:US)’s Yoplait and Fage Dairy Industry SA also sell Greek yogurt.

“It’s certainly crowded,” Interbrand’s Chidley said. “A new entrant is going to have to have something compelling.”

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • PG
    (Procter & Gamble Co/The)
    • $92.0 USD
    • 1.30
    • 1.41%
  • SBUX
    (Starbucks Corp)
    • $80.03 USD
    • -0.41
    • -0.51%
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