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For people who hate coffee, free WiFi, scones and obnoxious baristas, Starbucks Corp. (NASDAQ: SBUX) has entered the yogurt business, which is among the most crowded food businesses in the world. But Starbucks has well over 10,000 stores, so it can fail with this initiative on a monumental basis.
The Starbucks enterprise is a joint venture, because it apparently knows nothing about yogurt on its own. The coffee company announced its new initiative:
Starbucks Coffee Company, the world’s leading coffee retailer and roaster of specialty coffees, and Danone, the world’s leading producer of fresh dairy products, today announced a strategic agreement to offer a jointly created and developed selection of new, healthy specialty yogurt products in participating Starbucks stores and in grocery channels. This will advance Danone’s ambition to expand yogurt consumption in the U.S., while growing Starbucks health and wellness offerings for its customers under the company’s Evolution Fresh brand.
A new portfolio of delicious and nutritious Evolution Fresh, Inspired by Dannon- branded ready-to-eat Parfait Greek yogurt products will be co-created by Starbucks and Danone for exclusive distribution in the U.S. Starbucks will offer the products through its stores in spring 2014, and Danone in grocery channels in 2015. Distribution is planned to be extended to include targeted markets around the world in a second phase that builds upon the success of the U.S. initiative.
Among the weaknesses of the program is the damage it could do to Danone, which already sells products in grocery stores. A new product may not add net sales, but could just as easily eat into current ones.
Another part of the plan that could backfire is that Starbucks already sells dozens of products in most of its stores, including copies of The New York Times and USA Today. The coffee chain also risks a cannibalization of its frap, donut, oatmeal and breakfast sandwich business. CEO Howard Schulz must think otherwise. So far, he has been able to shoehorn more products into his stores than anyone could have anticipated when they were just coffee shops.
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