Starbucks Corporation (SBUX) Looks to Yogurt Deal to Expand Food Offerings

Yogurt for breakfast is good. Coffee for breakfast is good. Yogurt-coffee might be crossing a hidden line, though. Thankfully, that’s apparently not what Starbucks Corporation (NASDAQ:SBUX) and Danone SA (ADR) (OTCMKTS:DANOY) had in mind when they recently announced a plan to release yogurt together starting in 2014. The companies both get a benefit from the agreement, with Danone SA (ADR) (OTCMKTS:DANOY) using Starbucks Corporation (NASDAQ:SBUX) to get more exposure in the American market, while Starbucks gets another arrow in its food-quiver.

Starbucks has been pushing for more food income for the past year, and this is just one small step on its long road. The long-term plan for Starbucks Corporation (NASDAQ:SBUX) is to gain a bigger foothold in the lucrative U.S. food market and help it compete with other cafes like Panera Bread Co (NASDAQ:PNRA) and McDonald’s Corporation (NYSE:MCD). Based on those goals, things are looking good for the coffee retailer.

Europe vs. America
In a presentation the company gave earlier this year, Starbucks Corporation (NASDAQ:SBUX) illustrated the value that food can bring to its American business. The company presented a chart showing food sales as a portion of total store sales. On the high end, with 28% of sales attributed to food, sits France. On the low, with only 10%, China. Right smack in the middle, with 19% of sales from food, is the U.S.

That ties nicely into the difference in yogurt sales between the two continents, as well. In Europe, the per capita consumption of yogurt is substantially higher, with Americans consuming about a third of what Europeans eat. That gives Danone SA (ADR) (OTCMKTS:DANOY) a reason to support Starbucks in its quest. On top of the existing potential, Greek-style yogurt — which the two companies will be selling — is growing quickly in popularity, and now makes up 40% of U.S. consumption. Not only will Starbucks Corporation (NASDAQ:SBUX) be selling an underrepresented product, but a growing underrepresented product.

The challenge for Starbucks
Americans still see Starbucks as a place to get a cup of coffee, but not a place to get a bite to eat. Panera Bread Co (NASDAQ:PNRA) is the current go-to location for a bite and a drink. It has managed to walk the fine line between bakery and cafe, and has seen sales rise at a steady clip due to that acrobatic trick. The business grew comparable sales by 3.3% year over year in the first quarter.

Meanwhile, McDonald’s Corporation (NYSE:MCD)’s has continued to stall out. In its latest earnings report, the burger chain reported a lackluster 2.4% increase in quarterly earnings, year over year.