Starbucks Corporation (SBUX), Whole Foods Market, Inc. (WFM): In Hindsight, These Acquisitions May Be Genius

One of the biggest questions investors have had for Starbucks Corporation (NASDAQ:SBUX) over the past few years is “Where’s the growth going to come from?” It led many to believe that Starbucks Corporation (NASDAQ:SBUX)’ best days were behind it. Heck, I even had trouble convincing people here at Fool HQ that it was a good buy a couple of years ago. Thankfully, I had the opportunity to put the Fool’s money behind my own research back in February 2011. The stock is a clean double since then.

Strategic acquisitions deserve a good bit of the credit here. While the deals have been debated ad nauseam in the press, management’s presentation at the Sanford Bernstein Strategic Decisions Conference last week offered up some clarity on its thinking and how these acquisitions are playing out:

The juice is loose
Premium juice maker Evolution Fresh was added to the Starbucks Corporation (NASDAQ:SBUX) family in November 2011 for a modest $30 million cash. At the time, it was a curious purchase, but this could turn out to be a nice little value-add. Management sees Evolution Fresh as a straight shot at the health and wellness lifestyle that many Starbucks Corporation (NASDAQ:SBUX) customers are adopting.

High-pressure pasteurization is the process behind the juice and every Starbucks Corporation (NASDAQ:SBUX) store in the U.S. will adopt four to eight SKUs for Evolution Fresh juice as the rollout is completed. This rollout is happening now on West Coast and will make it to the East Coast by end of this calendar year. In regard to channel development, Evolution Fresh will also be rolled out to high-end grocery stores nationwide. In fact, it’s already in 3,000 stores on the West Coast including Whole Foods Market, Inc. (NASDAQ:WFM).

It’s all baked in
La Boulange (Bay Bread) was next up in June 2012 for $100 million cash. Management has referred to food as the company’s Achilles’ heel as it was not interested in functioning as a typical restaurant. Food is viewed primarily as an incremental opportunity to add to the two in every three U.S. transactions that don’t have a food item attached. The La Boulange acquisition has given Starbucks an artisan bakery with proven products that it will be able to integrate seamlessly into operations both in its coffee shops as well as stores nationwide. Within 18 months, it will be in every Starbucks Corporation (NASDAQ:SBUX) store in the country.