Seattle coffee giant's next extra: hot food

December 11, 2004|By NEW YORK DAILY NEWS

Care for a premium-priced bacon and egg sandwich with that latte?

Starbucks, the upscale coffee chain, is speeding up its hot food experiment on the West Coast and is poised to roll out the new menu nationally.

A test program it began last year in 20 Seattle stores has quadrupled to 80 stores after positive results.

"We've been pleased with the test results so far and our customers have responded favorably. We continue to believe our food program is an opportunity for growth going forward," said Starbucks spokeswoman Valerie Hwang.

The coffee giant got 12 percent of its $4 billion in sales through food last year, mostly with cold items such as cookies, muffins and salads.

But ideal spots for more restaurants are dwindling after a sizzling pace over the past decade led to 6,300 U.S. locations along with 2,400 abroad.

So hot food, including breakfast and lunch sandwiches, is where Starbucks hopes to find its next big wave of sales growth, which has averaged 31 percent over the past five years.

The egg and muffin sandwiches, with bacon, sausage or spinach, go for $3 out West, nearly a dollar more than a McDonald's Egg McMuffin.

But the reviews aren't all good.

Barry Sine, an analyst who follows Starbucks for H.D. Brous & Co., described them as "airline-type food." He's dubious that some sandwiches can ignite the next round of Starbucks' profits.

"They are brought in from caterers and reheated, not cooked fresh on the premises like McDonald's pancakes," Sine said, adding that it's not a good match for Starbucks' high-quality coffee since the pure coffee aroma is what attracts most customers in the first place. He has a "sell" rating on the stock.

He added that pursuing high-quality lunch items would make the most sense for a restaurant that needs to increase afternoon traffic, because most are in urban locations with plenty of potential customers. Many sit nearly empty in afternoons and evenings, a far cry from morning rush hours that often have lines around the block.

"But it's tough because they're stuck with the real estate they have; there isn't room for a McDonald's-style kitchen," Sine said.

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