As Frappuccino Sales Decline, Starbucks Focuses On Cold Brew Coffee

Starbucks sees growth in cold beverages
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As the world’s most popular coffee chain reviewed their third-quarter earnings this week, they discovered that the demand for frappuccinos, the ice-cold, sugary-sweet beverages that have become their signature, is not as popular as they once were. According to Forbes, frappucino sales fell 3 percent from 2017. Though a seemingly paltry amount, the company is looking for ways to make up the revenue with a lineup of other cold beverages, given that frappuccinos had historically accounted for 11 percent of their total revenue.

Over the years, Starbucks has capitalized on the popularity of the drink (which had been responsible for double-digit sales growth in the late 2000s) by rolling out numerous flavors on top of their staples of vanilla, strawberries and cream, mocha, caramel, java chip, and coffee. Last year, the company unveiled the Unicorn frappuccino, and a quick glance on their website shows flavors like cupcake, lemon bar, red velvet, horchata almond milk, chai, matcha green tea, and more.

But Starbucks isn’t planning to forgo the iced coffee craze. Five years ago, iced coffee accounted for 37 percent of their revenue; now, cold drinks account for over 50 percent of the business.

“We’re seeing a strong shift to cold and we’re playing directly in that space,” said chief operating officer Rosalind Brewer. According to USA Today, the company plans to boost promotion of their cold brews and “fruit-juice based Refreshers.”

In addition to a decline in frappuccino sales, the company’s shares have also declined “10.7% year to date,” according to The Street. Recently, the company announced that it was planning to close over 150 stores nationwide, also reported by The Street.

“Starbucks is optimizing its U.S. store portfolio at a more rapid pace in FY19 [fiscal year 2019], including shifting new company-operated store growth to underpenetrated markets, slowing licensed store growth, and increasing the closure of underperforming company-operated stores in its most densely penetrated markets to approximately 150 in FY19 from a historical average of up to 50 annually,” the coffee giant said in a report released in June.

The company also announced that they will be making massive changes to their Starbucks Rewards program, which required people to obtain “125 stars” before getting a free beverage or food item. Now, “that will change to allow customers to obtain lower-priced items sooner while redeeming fewer stars.”

Additionally, the company plans to feature drive-thrus at any new cafe, since they are often “more lucrative than the typical non-drive-thru store.”

“Drive-thrus generate about 25% to 30% more revenue,” said CFO Scott Maw.

CEO Kevin Johnson added that drive-thrus, along with mobile payments, are more popular because they add an air of convenience.