Starbucks Imports an Upscale Italian Bakery to Combat a Slowing U.S. Market

July 31, 2018, 2:26 PM UTC

Starbucks may be a coffee behemoth, but it’s doubling down on food as part of its efforts keep growing.

On Tuesday, the Seattle-based company is opening the first U.S. standalone Princi, an upscale Italian bakery chain that Starbucks backed in 2016 and agreed to license globally.

The standalone Princi, which includes an oven for on-site baking and a manual espresso machine, is located in Seattle, making Starbucks’ home market the test case for the company’s upscale retail strategy.

The city now houses the Princi bakery and the first super-luxe Reserve Roastery. Its also home to the first Reserve Store and several Starbucks stores with Reserve coffee bars—boutiques a notch above a regular Starbucks but not quite as flashy as the Roastery. Princi is the exclusive food purveyor in its Roasteries and Reserve Store.

The move represents Starbucks’ attempts to go more upscale as it seeks out new business amid a U.S. sales slump. The company saw traffic decline in the most recent quarter, even as same store sales grew 1%, in part due to a price hike. Starbucks has lowered its sales expectations for the year and has said it will shut down underperforming locations.

Starbucks is attempting to develop a new engine of growth with its brand-within-a-brand strategy, as well as to combat higher-end third-wave coffee chains like Blue Bottle and Stumptown.

It plans to eventually open 20 to 30 Roastery locations—where the average check is four times that of a typical store—and 1,000 Reserve locations, which are expected to generate double the annual sales of a typical Starbucks. The company has also said it will open 1,000 Princi bakeries globally.

Starbucks has a fraught history with retail brands that it has gobbled up. It acquired Seattle’s Best in 2003, but later shut down all of its stores. Last year the company said it would close all of its Teavana stores, a tea chain it acquired in 2012, as well as its two remaining Evolution Fresh juice stores, which it acquired in 2011.

In 2012, Starbucks acquired pastry chain La Boulange as part of its ongoing attempts to improve its food quality, only to divest of the stores three years later. At the time, the company said the decision was driven by a need to focus on the core Starbucks business rather than operate two separate chains.

All of those brands live on within Starbucks’ stores and as consumer packaged goods brands. A Starbucks spokesperson noted that in the case of Princi, the company is a licensee rather than the parent company.

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