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More booze Starbucks' latest wrinkle

Expands offerings of alcohol, food

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Ted S. Warren / The Associated Press FILES
Howard Schultz, CEO of Starbucks, has delegated the firm�s day-to-day operations in order to focus on cutting-edge initiatives.

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Ted S. Warren / The Associated Press FILES Howard Schultz, CEO of Starbucks, has delegated the firm�s day-to-day operations in order to focus on cutting-edge initiatives.

CHICAGO -- Starbucks is betting big on booze.

Starbucks will expand its evening alcohol and light bites menu, which includes bacon-wrapped dates and Malbec wine, to thousands of stores, chief operating officer Troy Alstead said in a phone interview. The rollout, which may help boost sales, will take several years, he said.

"We've tested it long enough in enough markets. This is a program that works," he said. "As we bring the evening program to stores, there's a meaningful increase in sales during that time of the day."

Starbucks has been focused on selling more non-coffee items, such as alcohol, juice, Teavana tea and food, to stoke growth. The company also is expanding and improving its rewards program and mobile applications. Earlier this month, Starbucks said it would soon test a way for customers to order items ahead of time with their smartphones.

Shares for the Seattle-based company have dropped 3.2 per cent this year, compared with a 0.7 per cent increase for the Standard & Poor's 500 Index.

The company first sold alcohol in October 2010 at a Seattle store. In January 2012, Starbucks said it was expanding the test to as many as 25 locations in Chicago, Atlanta and Southern California. In Chicago, the after-4 p.m. menu includes fare such as truffle macaroni and cheese, chicken skewers, Chardonnay and chocolate fondue.

The evening food and drinks, which are in about 40 stores now, won't work in all Starbucks cafés, Alstead said. He said they've seen success in some urban areas, near other restaurants and theatres, where people are out at night.

Last month, chief executive officer Howard Schultz handed over the company's day-to-day operations to Alstead so Schultz could focus more on digital, mobile, loyalty and electronic-commerce initiatives. The company said Thursday in a statement its mobile-payment application has been gaining traction.

Mobile payment now accounts for 14 per cent of in-store transactions in the U.S., up from a 10 per cent rate disclosed in July. Starbucks also said it will open at least 20 additional Teavana stores in the current fiscal year.

"Mobile is very important," Peter Saleh, a New York-based analyst at the Telsey Advisory Group, said in a phone interview. "The companies that are taking share are the companies that have some mobile, digital platform -- Papa John's, Domino's, Starbucks, Dunkin'."

Starbucks' loyalty program entices diners by offering free beverages, food and refills in return for points they've accumulated from purchases. Customers can pay with mobile phones or Starbucks cards that are linked to their account.

As part of its effort to sell more tea, the company will begin offering Oprah Winfrey-branded chai tea on April 29 at stores in the U.S. and Canada, Schultz said at the company's annual meeting Wednesday. Winfrey, the television personality and entrepreneur, tasted different tea varieties and helped Starbucks create the blend, which includes black and rooibos teas.

"This felt like something that I really loved, that I really cared about," Winfrey told Schultz at the meeting. Starbucks will donate money from the tea's sales to charities that support youth education.

Starbucks bought Teavana Holdings last year in a transaction valued at about $626 million. It has since been expanding the brand and plans to open tea bars in Chicago and Los Angeles this fiscal year.

Starbucks has more than 20,100 locations worldwide, including about 11,500 in the U.S. and more than 1,300 in Canada.

-- Bloomberg News

Republished from the Winnipeg Free Press print edition March 21, 2014 B10

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