Starbucks scales back new stores, expects new drinks to perk up traffic

Blaming the challenging economic environment, Starbucks Corp. significantly scaled back its U.S. expansion targets for the next three years, but expressed hope the summer launch of new beverages would snap a slowdown in traffic. The company also disclosed plans to take yet another crack at the breakfast market, this time with proprietary baked goods and chilled products.

With profits dropping 28 percent for the second quarter ended March 30, Starbucks officials lowered their store-opening projections for the United States to about 1,020, including 620 company-operated and 400 licensed units. That represents a 43-percent decline from the 1,800 units that were opened domestically in 2007. Earlier in 2008, officials disclosed plans to cut new openings by 425 units and close 100 underperforming stores.

Slower domestic growth is expected to continue through the next three years, with fewer than 400 net new stores expected to open each year for a total of 21,500 by the end of 2011.

However, Starbucks plans to continue accelerating international expansion, with a target of foreign units accounting for about 40 percent of the global portfolio by 2011. As previously announced, this year 975 new stores are expected to open internationally, growing to 1,050 in 2009, 1,150 in 2010, and 1,300 in 2011.

Meanwhile, Starbucks this summer will unveil three new types of beverages, including entries into the $4.4 billion energy drink market.

Starbucks said it would debut new custom-made DoubleShot caffeine drinks as well as ready-to-drink energy beverages in a distribution partnership with PepsiCo.

In response to increased consumer demand for healthful products, Starbucks said it also would roll out a new whey protein-and-fruit-based drink that would be available in two flavors, each containing fewer than 270 calories.

In Southern California, Starbucks said it would begin offering a new Italian-style frozen fruit drink that will likely roll out nationally in 2009.