Starbucks Revisits The European Cafe – Forbes

Starbucks is re-visiting the old concept of European cafes, adding cold drinks to its menu and offering free online newspapers, in order to keep the hype for the brand alive.

Starbucks has learned a great deal from European traditional coffee shops and cafes. Its “third place,” providing a spacious place to share espresso drinks prepared by baristas, has much to do with the traditional Italian cafes.

And that helped the chain become part of the American urban landscape more quickly and effectively than any retail company in history, and has forever changed the way Western companies market themselves to consumers.

Back in 2015, Starbucks came back to re-visit the European concept café. This time around, it expanded its cold coffee menu, including Nitro cold brewed coffee. And more recently, it offered complimentary access to Wall Street Journal, Barron’s, and USA Today to customers going on line in its stores.

European cafes have for a long time been offering cold coffee drinks, including frappe, and fredo cappuccino. Mikel Coffee Community, for instance, a Greek franchise chain with 250 stores worldwide, has offered a dozen cold coffee drinks since its inception.

Some traditional European cafes have also been offering free newspapers, though in the old print form.

Starbucks replication of the European cafes has paid off nicely before—making the company the largest coffee-shop chain in the world with $26 billion in sales and $7.5 billion in profits. And it’s paying again in these days, keeping up the buzz for its brands alive and reviving sales. 

Last week, the company reported a 6% jump in same store sales growth in the Americas – a region that was considered mature as recently as 2018.

That was a “big surprise,” says Adrian Fadrhonc, Portfolio Manager at Ashfield Capital Partners.

Starbucks big surprise performance in its home market is mostly owned to the Nitro cold coffee sales. “Not new but what they call ‘beverage innovation’ has become increasingly important to same store sales growth,” says Fadrhonc. “Some estimate that Cold Beverage was responsible for ½ of their same-store sales growth in the last quarter. Starbucks is really marketing Nitro right now which is cold brewed coffee infused with Nitrogen. It changes the texture of the drink.”

Apparently, that’s what sells among Starbucks customers these days. It, too, reported strong Nitro coffee sales last week.

 Fadrhonc is still bullish in Starbucks stock. “Starbucks has been a pioneer among retail and restaurant companies in navigating changes in consumer behavior caused by demographic shifts and technology disruptions,” he says. “We view it as more of a growth staple at this point (people need their coffee) and we think the risk profile also has positive portfolio benefits.”