Need to Know
- Starbucks plans to use insights from Deep Brew, its in-house AI tool, to guide its future plans and expansion.
- Deep Brew will also be leveraged for predictive ordering, to guide return customers towards menu items they may enjoy based on previous orders.
- The company anticipates it will expand to 55,000 locations globally by fiscal 2030, with an emphasis on drive-thru stores in suburbs and “walk-thru” locations in urban centers.
Starbucks is continuing to tailor its expansion to the COVID-19 pandemic, with CEO Kevin Johnson revealing on Wednesday during an investor day that the coffee chain expects it will grow to 55,000 locations globally by fiscal 2030.
Much of Starbucks’ future growth will hinge on the launch of Deep Brew, the company’s proprietary AI, which will influence Starbucks’ operations from staffing and scheduling to inventory management and predictive ordering for customers. Deep Brew has been a priority for Starbucks throughout 2020, as the company fine-tuned its focus on digital operations, even pre-pandemic. Deep Brew currently runs calculations on inventory levels, and predicts how many baristas are needed on staff every 30 minutes of the day, among other tasks. According to Johnson, reallocating these tasks from human employees to machine learning means staff can spend more time meaningfully interacting with customers.
“In the future, customers will receive even more suggestions, like how to make their drinks perfect for them and recommendations that help us manage inventory and improve speed of service leaving more time for our baristas to do what they do best, connect with customers,” Johnson said of the integration of Deep Brew, “This is where art and science come together so perfectly.”
Deep Brew can also be used to recommend opening strategies after a COVID-19 vaccine becomes widely available; this, Johnson said, may help Starbucks continue to “navigate through the virus.”
Starbucks has prioritized digital growth throughout 2020, having leveraged its digital properties when reopening many physical storefronts in the spring. Thanks in part to an expansion of payment and rewards options, the company’s Starbucks Rewards app currently has 19.3 million active members in the U.S., with those members accounting for almost 50% of the company’s revenue, and almost a quarter of Starbucks transactions coming from order-ahead mobile orders. Starbucks has “high ambitions for growth” to its Rewards program, Johnson said.
In addition to focusing on digital, Starbucks is approaching its physical expansion strategically: more walk-through restaurants, called Starbucks Pickup, will open in urban centres, while the company will continue to open drive-thru locations in the suburbs. Starbucks anticipates it will increase the number of physical locations it currently operates by 70% in the next ten years, projecting it will expand to 55,000 stores by fiscal 2030. CFO Pat Grismer noted that this expansion is “a level that is currently unmatched by any other single food and beverage retail concept, fuelled by unparalleled brand appeal globally and strong unit-level economics.”
The company has also renewed its commitment to environmentalism, announcing that it will be making a $50 million Investment in The Global Farmer Fund, and revealing a goal to offset 50% of company-operated production sites and electricity consumption in the US by 2022 through a purchase agreement with a solar farm in Virginia. And, in keeping with current food and beverage trends, the company will make oat milk available in all stores across the US in 2021.