The Most Interesting Things from Starbucks Analyst Day

Splashed all over the place on Starbucks (SBUX) analyst day was the gigantic amount of global store openings and remodels planned for the next five years. Even little Teavana received some headlines as Starbucks, without question, has robust intentions for the brand, including the crushing of competitors in loose leaf tea and innovating where there is a fragmented market (ever see a neighborhood tea bar?). While these are indeed positive developments, and supportive of the bullish opinion I have on the stock, going lost in the sauce is this bit of positive news: consumers will now have the ability to accumulate loyalty card points on Starbucks products purchased in supermarkets. Here is what I see: •Closes a hole in the Starbucks ecosystem (products sold at supermarkets have always seemed to be a very separate business for Starbucks) and in the process, creates a nicely integrated model. For every Starbucks loyalist that may choose a cheaper bagged coffee/K Cup option at the local supermarket (aka cheating on the brand), now they will have to think twice about reaching for a non-Starbucks option. Starbucks has given the consumer a reason to maybe forego the cheaper store shelf alternative by dangling the promises of XYX free item of choice at the stores with the acquisition of enough points. •Gives Starbucks a first mover advantage against a Dunkin Brands (DNKN), which like Starbucks, operates a retail plus supermarket model. But, the Starbucks program could also bite a Green Mountain (GMCR), private label organic supermarket brands, and perhaps a Target branded coffee blend as the consumer sees greater value in opting for Starbucks (coffee today to satisfy a need + the promise of a free splurge/satisfying of a daily fix in the future). •Starbucks now has a model in place to be applied to other offerings that find their ways into supermarkets (who doesn't think Teavana loose leaf tea bags won't be a reality). The read: In time, Starbucks should incrementally benefit from higher transaction and traffic numbers at its stores from the program. Additionally, this program has an added layer of intrigue in light of Starbucks' plans to work closer with Square.