Schultz: Starbucks to enter energy drink market

Starbucks’ CEO Howard Schultz announced in a letter to the company’s partners that the coffee giant would bring three new RTDs to the market – including an energy drink. An excerpt from the letter follows:

The first new beverage platform represents Starbucks entry into the energy beverage category, which is a multi-billion dollar market segment. Our entry offers a significant opportunity for us to complement our current customers’ lifestyles and reach out to new customers. Other entrants into this space use caffeine as a supplement in their energy beverages, which makes Starbucks a natural—and gives us a unique position in the marketplace with Starbucks® coffee as well as build equity in our brand.

With this introduction – and for the first time in the company’s history – we are leveraging the assets of our relationship with Pepsi to introduce Starbucks DoubleShot® with energy across multiple channels – in our retail stores and through the more traditional Consumer Products Group (CPG) channels.

· Living a healthy lifestyle is a personal focus of mine, and I am pleased that Starbucks is launching a Health and Wellness platform that will include some great product offerings. We also see this as an important long-term growth driver for the company. This summer, we will make our first significant step forward into this category when we introduce a Health and Wellness beverage platform, with new food offerings joining the platform later in the calendar year.

Our customers have told us that they are looking for healthy beverage alternatives that taste great, with moderate calories. We listened to them and we believe we have hit the mark with a protein and fruit-blended beverage that we have developed. This delicious drink is a made from simple and wholesome ingredients that provide the benefit of sustained energy.

We have been testing these beverages in our stores, and they have received rave reviews from our customers and partners, even exceeding our early expectations. We have a deep pipeline of many new products that we plan to introduce through the rest of the year. We are confident that Starbucks can be a destination for great healthy beverages and food.

· For some time, we have been searching all over the world for a cold beverage concept that would create the type of taste and customer excitement that our Frappuccino® Blended Beverage did more than 10 years ago. Finally, on a recent trip to Italy, we found a unique product that we believe will be a perfect complement to our overall beverage business. This exclusive, proprietary product—which is refreshing and indulgent all at the same time—was developed through a partnership with our Italian supplier and represents a new category of beverage. With its unique frozen, smooth texture and distinctive taste profiles, ranging from fruit-based to dairy-based to yogurt-based ingredients, we are sure that these innovative offerings will attract new customers.

We are rapidly developing the product line-up, and have plans to initially launch these new beverages by mid-summer in parts of California, where there is a strong preference for robust cold beverages. I haven’t tasted anything this good in a long time. We are confident that our unique new beverage category will be received with great enthusiasm by our customers in California, and set the stage for our national launch in fiscal year ’09.