The Seattle-based coffeehouse giant that somehow hooked consumers on $4 espresso drinks saw U.S. systemwide sales percolate by 20.5% to $5.79 billion, handily outpacing sales growth (6.6%) of the nation's top 10 chains and 5.8% growth among all restaurants, according to Technomic Information Services.
Among the nation's top 10, Starbucks caffeinated returns rocketed the coffee killer past Yum Brands' Pizza Hut and KFC into the No. 6 position. Starbucks could supplant Yum sibling Taco Bell within the next two years.
So it's no surprise that the bakery-cafe segment (up 27.8% in sales) led by Panera Bread and the beverage segment (up 19.8%) led by Starbucks were the two fastest-growing among limited-service chains.
Their influence in breakfast and between meal sales is evident in the host of menu and daypart initiatives launched last year by the burger and sandwich players. Mickey D's, Burger King, Subway and Dunkin' Donuts all upgraded their coffee blends. Meanwhile, McDonald's, Wendy's and Subway dabbled in fancier deli-sandwiches with artisan-style breads. Starbucks and Dunkin' Donuts, in response to the a.m. raids, began to build their breakfast and lunch sales with their own interpretations of the McMuffin sandwiches and lunch offerings. Now Wendy's is testing a breakfast menu.
Lunch at the coffeehouse
Analysts credit the coffeehouse chain's rollout of lunch and breakfast with helping pump comparable sales this year. About 3,500 locations, or roughly 60% of North American company-owned stores, now offer lunch and Starbucks plans to push that soon to 70% and possibly 80%. Also, about 600 stores will be offering warm breakfast sandwiches by October when Starbucks closes its fiscal 2006.
Indeed, the upscaling of the quick-service restaurant menus has helped blur the lines between fast-food and fast-casual concepts. "You're starting to see limited service and quick casual start to get closer together in price, but quick casual offers a different type of occasion and atmosphere," says Darren Tristano, managing director at Technomic. "We used to draw the line at $6.50 or $7 [the average transaction total] for quick casual. Now it's harder because some chains like Culver's have check averages closing in on $8."
However, Starbucks has a long way to go to reach the $25.6 billion of category leader McDonald's. The Golden Arches' sales juggernaut has lost pace, but U.S. sales gained an impressive 5.1% during the year on minimal 0.4% unit growth. Starbucks' unit growth in 2005 rose 20.2% to 7,661 in the U.S. to rank third among the top 10 behind Subway (19,620) and McDonald's (13,727).