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Starbucks outlines strategy to counter sluggish growth

President and CEO, Kevin Johnson, says coffee giant’s performance is “not acceptable” as he announces plans to accelerate global growth and improve shareholder returns
Starbucks has unveiled a strategic plan to bolster sales and growth performance amid US store closures and a lower-than-expected global sales forecast of 1% for Q3 2018.

The global coffee shop chain said it would be targeting accelerated growth in long-term growth markets, the US and China. It will also ‘expand and leverage’ its global reach through the Global Coffee Alliance with Nestle and increase focus on shareholder returns, which includes a 20% increase in the company’s regularly scheduled quarterly dividend.

In May 2018, Nestle paid Starbucks $7.15bn for exclusive rights to sell Reserve, Teavana, Starbucks VIA and Torrefazione Italia packaged coffee and tea, a business which generates $2bn in sales annually.

The world’s largest coffee shop chain has seen increased competition from low-cost rivals, such as McCafé and Dunkin Donuts in recent years and faces a further challenge from the popularity artisan independents.

In a press statement, Starbucks acknowledged it needed to improve consumer engagement on key trends, such as health and wellness and digital engagement.

“We must move faster to address the more rapidly changing preferences and needs of our customers,” said President and CEO, Kevin Johnson.

“While certain demand headwinds are transitory, and some of our cost increases are appropriate investments for the future, our recent performance does not reflect the potential of our exceptional brand and is not acceptable,” he added.

In a sign that Starbucks believes some of its more mature markets are becoming saturated, the firm also announced that it would be shifting new company-operated store growth to ‘underpenetrated markets’ while ‘optimizing its U.S. store portfolio at a more rapid pace.’

The latter action includes a plan to close around 150 US stores during 2019 – three times the historical average of 50 closures per year.

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