Starbucks (SBUX) is one of the most dominant brands in the world, but the coffee chain has plenty of room for growth.
Analysts at Morgan Stanley highlighted four major growth opportunities for Starbucks based on a presentation by company executives.
None of the growth opportunities directly involve coffee, Starbucks’ signature product.
Instead, executives should focus on food, tea, and soda:
1. The Boulange Bakery. Starbucks is in the process of replacing its traditional pastries with sweets from the La Boulange brand, a longtime San Francisco favorite. In addition to offering more edgy “sweet and savory” items, Starbucks is now heating up all pastries before they’re served to customers. “Results are getting better as more cities are added, with strongest adoption on the coasts,” the authors write.
2. Drive-thrus. Starbucks is continuing to add drive-thrus at locations across America, which Morgan Stanley (MS) calls a “meaningful sales driver.” Two-thirds of units Starbucks is building this year have drive-thrus, according to the note.
3. Lunch. Starbucks is testing lunch soups and sandwiches at certain locations. Menu items include barbecue pulled pork sandwiches, chicken noodle soup, and a grilled chicken chipotle panini. “Lunch test is still in early stage but we see it as big incremental opportunity,” the analysts write.
4. Soda and tea. Starbucks is currently rolling out more carbonated beverages and Teavana teas, categories that will expand to all locations by the end of 2014. Starbucks also plans to add as many as 1,000 Teavana cafes in the next few years.