Kevin Helliker of the Wall Street Journal reports that in the days ahead, a clue to the long-range growth strategy of Starbucks Corp. will become apparent, though not at its vast chain of coffee shops. Instead look down the coffee aisle of your local grocer.

Starbucks is rolling out Via instant coffee—so far sold only in its own shops and a couple of retail chains—to tens of thousands of supermarkets, mass merchandisers and other outlets in coming weeks. The product’s migration from coffee counter to grocery aisle reflects one of the food industry’s hottest trends: putting more restaurant brands like California Pizza Kitchen and P.F. Chang’s China Bistro into grocery aisles.

Starbucks plans to roll out a “pipeline” of new products in the next 12 to 18 months, all following the model of Via, where the product makes a highly publicized debut in the company’s coffee shops, then an even more-heavily marketed transition into the grocery aisles. Creating a “very significant consumer packaged goods” business is a “centerpiece” of the company’s growth strategy, said Starbucks Chief Executive Howard Schultz in an interview.

Mr. Schultz declined to elaborate on the products in Starbucks’ pipeline, or to estimate what percentage of sales grocery products could come to contribute. Grocery products—coffee beans, bottled frappuccinos and ice cream—presently account for nearly 10% of Starbucks’ sales. And because supermarkets bear the costs of infrastructure, those sales boast higher margins. Starbucks grocery products account for 25% of total company operating profit, on a basis outside generally accepted accounting principles, the company says.

“It’s an intriguing question how far Starbucks the coffee shop can morph into Starbucks the brand,” said Sharon Zackfia, an analyst who follows the company for William Blair & Co. in Chicago. The strategy “bears some risk. And Howard does strike out sometimes. But he also hits home runs,” she said. Ms. Zackfia owns some Starbucks stock.

But Via will have to prove itself in the grocery aisles. Its debut in Starbucks coffee shops last fall helped reverse a year-long string of same-store sales declines at the company. But that success also reflected an aggressive push from baristas inside Starbucks coffee shops, where the company handed out samples and staged taste tests.

Without that advantage inside supermarkets, Starbucks plans to distribute coupons, purchase in-store displays and hire people to hand out samples. It will also unleash a larger television and print advertising campaign than what it launched amid Via’s coffee-shop debut last autumn.

Read more agt:  Wall Street Journal