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Starbucks CFO Says Improving Food With Coffee Artistry

Starbucks Corp. (SBUX) will give the same attention to its food as it has to beverages, which has made it the world’s largest coffee-shop operator, Chief Financial Officer Troy Alstead said.

“The artistry of coffee that we’ve mastered so well for so many years and hold so dear, there’s also that exact artistry around food that we just haven’t frankly had until now,” Alstead said during an interview in Chicago today. Starbucks will use the newly acquired Bay Bread LLC and La Boulange brand to improve its food ingredients and cooking techniques, he said.

Starbucks spent $100 million on Bay Bread, its biggest purchase, to offer better quality food at its cafes and help accelerate sales of non-coffee items. This year, the Seattle- based company has opened a store selling flash-pasteurized juice and announced plans to sell energy drinks called Refreshers.

The purchase of Bay Bread is the catalyst for a multiyear program of a “significant change in our food,” Alstead said. Food at Starbucks is a “multi-billion dollar opportunity.”

Food accounted for about $1.5 billion, or 19 percent, of Starbucks U.S. store sales last year. Baked goods make up about half of that revenue, Alstead said.

K-Cup Sales

Starbucks said on June 4 that the Bay Bread deal would cut fiscal second-half earnings by about 2 cents a share. At an investor conference today, the company reduced the high-end of its earnings forecast ranges for the third and fourth quarters by one cent each, to 45 cents and 47 cents a share, respectively. Both numbers trail the average of analysts’ estimates compiled by Bloomberg.

Starbucks rose 0.4 percent to $53.04 at the close in New York. The shares have gained 15 percent this year.

The coffee company, which began selling K-Cups for Green Mountain Coffee Roasters Inc. (GMCR)’s brewers at its U.S. cafes today, will use its 10,800 U.S. locations to introduce customers to the single-cup pods, Alstead said. Keurig machines will be on display in stores beginning later this year, he said.

Starbucks, which has sold branded K-Cups in grocery stores since last year, signed a multiyear contract with Green Mountain and intends to continue its partnership with the Waterbury, Vermont-based company when its main K-Cup patents expire in September, he said. Green Mountain has been exceeding Starbucks’ K-Cups needs, Alstead said.

There are more than 17,400 Starbucks locations worldwide.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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