Consumers are lovin’ McDonald’s all-day breakfast, to the tune of surging sales for the brand, but how long can the party last?
The effort, which included a social media-themed ad campaign by Leo Burnett, launched to much fanfare in October and so far has helped reverse the fast-food chain’s sagging fortunes. This week, McDonald’s announced that its fourth quarter comparable U.S. sales increased 5.7 percent due, in large part, to the launch of all-day breakfast.
According to research firm NPD Group, the percentage of McDonald’s customers who ordered breakfast at the chain grew from 39 percent prior to the launch to 47 percent afterward. And over the past two years, breakfast has been the strongest growth segment for QSR brands overall, with sales rising in the 3 percent to 4 percent range.
“Taco Bell and Subway entered the breakfast market, and there have been a lot of specialty innovations that have driven morning meal growth. Everyone wants to take advantage of that opportunity because it’s such a huge part of market share,” said Bonnie Riggs, restaurant industry analyst at NPD.
McDonald’s president and CEO Steve Easterbrook, who took the helm in March 2015, has executed a turnaround plan for the company that includes a simpler menu and faster service. In May, the chain pared down menu items to speed up order times. The brand’s focus on value, in the form of offerings such as its McPick 2 menu, which allows customers to choose two menu items (McChicken sandwich, double cheeseburger, small fries or mozzarella sticks) for $2, also was credited for increased sales in this week’s earnings call.
The fast-food chain’s vision in the U.S. is “to become a modern and progressive burger and breakfast restaurant focused on our food, the customer experience and value,” a McDonald’s spokeswoman said. “Simplifying our menu and operations procedure has made things easier for our customers and our crew and helped contribute to the rise in earnings.”
Will the momentum continue?
But after consecutive sales declines, McDonald’s latest results actually aren’t much to celebrate, says Darren Tristano, president of restaurant industry research firm Technomic. (The company’s U.S. sales rose for the first time in two years in October.)
“Strong results after a few years of sales declines can still be considered a rebound. They haven’t gotten back to where they were three years ago,” he said. “They’ve done a nice job with all-day breakfast, and aggressively advertised it, but all-day breakfast isn’t new. Jack in the Box, White Castle, other brands are rolling it out. [McDonald’s] out-performed the market in the recent session, but they’ve recently struggled to keep up, so it’ll be good to watch.”
On Jan. 7, McDonald’s U.S. restaurants also launched new packaging, with a sleeker, simpler design than previous iterations. Paul Pendola, foodservice analyst at Mintel, gave the change mixed reviews. “Saying they’re going to be a contemporary, modern burger place is too vague, and it doesn’t communicate to consumers what it is that makes them different, unique or better,” he said. “They could communicate that on the packaging. It’s super simple and lovely, but there’s no messaging on it about what makes them better or unique.”
Tristano was optimistic about McDonald’s fortunes, overall. “They’re focusing on the millennials with breakfast, the lower-income groups with value, and they’re innovating with some of the regional burgers they’re offering,” he said. “As long as they continue to focus on fundamentals and not over-complicate things on the menu level, they’ll have some momentum.”
It’s no secret that McDonald’s has been struggling. At a time when specialization is increasingly important in the food business, the brand has opted for breadth, offering everything under the moon: hamburgers, salads, yogurt parfaits and fancy chicken wraps. And it hasn’t worked. In fact, that’s putting it mildly.Each time McDonald’s has announced how much money it’s making, the company has been forced to share an embarrassing truth: Americans are eating less and less of its hamburgers, chicken nuggets and French fries. The routine became so consistently depressing that McDonald’s decided to quit sharing monthly performance data altogether in March.
But all of that seems to be changing: For the first time in a long time, McDonald’s is thrilled to tell everyone how it’s doing.
On Monday, McDonald’s said that same-store sales (those open for at least 13 months) increased by 5.7 percent in the last three months of 2015, more than twice what analysts had expected. The hefty jump is the largest the company has reported in almost four years.
The news comes on the heels of a major concession by the fast-food chain, which is no coincidence. For years, adoring fans pleaded with McDonald’s to extend its breakfast menu beyond the current 10:30 a.m. cutoff. For nearly as long, the fast-food behemoth shrugged off the ask, saying it doesn’t have the capacity to make breakfast and everything else at the same time. But this October, McDonald’s finally gave in, agreeing to offer Egg McMuffins and other breakfast fare from open to close. And the reaction has been overwhelmingly positive.
“All-day breakfast was clearly the primary driver of the quarter,” McDonald’s Chief Executive Officer Steve Easterbrook told investors in a conference call following the company’s earnings announcement. “We knew it would be.”
In some ways, the immediate success of all-day breakfast is a reminder of one of McDonald’s biggest follies: its inability to see itself what for what it is. Rather than embrace what its fans adore it for most — a place that serves hamburgers, French fries, chicken nuggets, and yes, an exceedingly popular breakfast menu — McDonald’s tried to become something other than itself, expanding its menu, largely with salads, wraps and other healthier but also more expensive fare, to mimic new competitors.
The Chipotles and Shake Shacks of the fast-food world have managed to sell pricier food, at least in part, because of their association with meaningful trends in the food world that prioritize good food over cheap food. But it’s a much harder pitch at cheap burger chains, which people visit for a respite from their (hopefully) healthier dietary regimen, rather than a reminder that they could be eating something better. It’s no coincidence that fast-food chain Sonic has flourished by accepting what it is, while McDonald’s has struggled by doing just the opposite.
The chain’s re-energized business can also be seen as a testament to the enduring popularity of the Egg McMuffin, arguably the most iconic breakfast sandwich in the world. The affordable egg sandwich, which was first served in the early 1970s, caught on so quickly that it helped popularize the entire breakfast sandwich category. But it hasn’t been replaced. Today, demand for it is such that the chain buys more than 2 billion eggs per year in the United States alone, or almost 5 percent of all eggs produced in the country.
“It’s one of the oldest items they’ve had on their menu, and it’s still one of the most popular,” said Darren Tristano, who is the president of Technomic, a food industry market research firm. “Selling it all daylong was a no-brainer.”
Since Easterbook became McDonald’s CEO last March, he has shown that he’s willing to not only listen to but also heed requests from the fast-food chain’s customers. The introduction of all-day breakfast is perhaps the best example, but during his short stint, he has already also shortened the McDonald’s menu and announced plans to switch to cage-free eggs and antibiotic-free chicken in the United States, among other things.
Tristano reminds that it’s too early to tell whether the most encouraging earnings in years is a sign of things to come. The real test will be what happens in the rest of 2016, and beyond. The excitement around all-day breakfast, and Egg McMuffins specifically, might not last, which even Easterbrook admitted to investors this morning. But the move has set an important precedent.
“I think listening to the customer is going to the most important rule McDonald’s has to follow,” said Tristano. “As long as they’re doing that, they should be fine, because the customer usually has the answer.”
When markets opened Monday, McDonald’s shares were up 3 percent on the news, but finished the day up less than 1 percent. Despite the company’s recent struggles, its stock is at a near all-time high.
It’s never been easier for consumers to get things delivered. So why not coffee?
Imagine a piping hot coffee delivered to your office or home at the proverbial “click of a button.” For consumers, it’s perfect. For the coffee companies attempting to provide these services, it’s a bit more complicated. But two of the major chains, Starbucks and Dunkin’ Donuts, are ready to give it a try.
2015 was a big year for Starbucks, which added several services designed to be quick and convenient. In September, the company rolled out nationwide availability of Mobile Order & Pay through its apps, which allows customers to order ahead on the app and pick up in-store without waiting. In October, Starbucks announced a pilot project: It started bringing coffee and other items to employees of the Empire State Building through an in-house service, Starbucks Green Apron Delivery, which promised items “delivered by Starbucks baristas right to your office.” And in December, Starbucks officially debuted its previously announced partnership with start-up Postmates, allowing customers in Seattle to order delivery using the Starbucks app.
It’s not just Starbucks getting into the delivery game. In November, Dunkin’ Donuts launched two programs designed to “make it even easier and more convenient for people to run on Dunkin’ from morning to night,” announced a company press release. On-the-go ordering — which works with the company’s app in a similar style to Starbucks Mobile Order & Pay — first launched in Portland, Maine. Dunkin’ Delivery, meanwhile, first launched in Dallas as a partnership with the on-demand delivery start-up DoorDash, and both services have expanded into other cities.
Although fast-food and coffee chains have great convenience, the expectation by consumers to get food delivered is increasing.
But why coffee delivery? “Both ordering methods are simply new ways to… meet customers where they are in their day,” says Starbucks spokesperson Maggie Jantzen. Apparently, the most-asked-for service on the My Starbucks Idea blog was, “When will Starbucks just bring me coffee?”
According to Darren Tristano, the president of food industry research firm Technomic, “with the rise of on-demand delivery services like Postmates and others, many operators have researched the opportunity to outsource or build delivery services,” and that includes brands already known for convenience. “Although fast-food and coffee chains have great convenience — including in-store and drive-through options — the expectation by consumers to get restaurant food delivered is increasing,” he says, “and broadening across new segments.”
But anyone who has waited longer than expected for a food delivery, received a dish that had cooled in transit, or not received what was ordered, understands that delivery logistics are complicated. Unlike Amazon shipments, there’s only a brief window of time that most food items can be delivered before getting cold or spoiling, and some might say that the window is even shorter for coffee.
“The flavor and aroma characteristics of hot, brewed coffee drinks change quite rapidly as the temperature decreases,” says Nick Brown, editor of Roast Magazine‘s Daily Coffee News. “And while everyone drinks their beverage at a different pace, the most loyal of customers may have some sensory expectations tied to their favorite drinks. Time and temperature seem to be the two biggest obstacles here in repeating the experiences consumers have come to expect within the brick-and-mortar retail locations.”
“Given the number of locations that each brand has, it should be relatively easy to develop delivery options,” Tristano says of the logistics. “Challenges facing both operators will include peak time service, logistics in-house, and managing the delivery in a way that doesn’t impact the on-premise operation or the brand quality as products leave the store.”
Starbucks’s rollout of Green Apron delivery seems to take these concerns into consideration. The company used existing infrastructure for its Empire State Building delivery: The building already had a Starbucks café, and the company uses a separate kitchen for the Green Apron orders. There are more than 12,000 employees in the building, but they are all just an elevator ride away. Customers place orders on a fairly simple website. Orders arrive in approximately 30 minutes, according to the company. But Ashley Fleishman, a lawyer who works in the Empire State Building, reported coffee delivered in 10 minutes. And yes, “the coffee is still hot,” she says.
Starbucks’s “Green Apron Delivery” service is designed for deskside deliveries within large high-rise buildings.
Green Apron Delivery partners are discouraged from accepting cash tips, says a company rep, but the company is working on adding digital tip options to the website. And although Starbucks did not share plans for expanding Green Apron, Jantzen describes the service as one “for customers within a designated high-rise building.”
The company has, at least, one new customer. Fleishman used to get her caffeine fix from her office’s Keurig machine. “I am not a religious coffee drinker,” she says. “So with Starbucks, I probably drink more than I previously did before delivery was offered.”
While the Green Apron delivery seems to focus on office delivery, “customers aren’t just in office buildings,” according to a Starbucks press release announcing the Postmates partnership in Seattle. “They’re at soccer games with their kids, at home with family, or gathering at the park with friends.” To get those skinny lattes to soccer games, Starbucks teamed with Postmates, a delivery company that has a love-hate relationship with the restaurant industry. (Postmates often offers delivery from restaurants without their consent.) Despite the complicated relationship with restaurants, Starbucks considers Postmates “an industry leader in the on-demand delivery space,” writes Jantzen. “They have the technology and expertise to scale this program with Starbucks.”
It’s safe to say Postmates is committed to the relationship: According to the company, they’ve designed a new carrier “so that we could ensure that the coffee would arrive the way it left the store.” Customers order through the Starbucks app, which has been modified to use Postmates’ ordering and delivery technology, the first and only food company app to do so. Users in Seattle and elsewhere can still order through Postmates directly, but having delivery built into Starbucks app allows customers to customize orders, the company said in a press release. For Postmates deliveries, Starbucks charges a $5.99 delivery fee.
Jantzen also says that Starbucks has “no additional plans to share in regards to other food delivery companies.” But it would not be uncommon for large chains to test our various food delivery options. For example, 7-Eleven is working with both Postmates and DoorDash in different cities. In terms of logistics, Slurpees have a lot in common with coffee — a delivery that’s just a few minutes late can be problematic.
Dunkin’ Delivery customers can order only through the DoorDash app — DoorDash has experience working with chains including Taco Bell and Kentucky Fried Chicken. The partnership probably made getting the program of the ground easier for Dunkin’ Donuts, but will most likely limit the information they can gather from their customers. For the partnership, DoorDash began deliveries at 7 a.m. or 8 a.m., a few hours earlier than the typical 10 a.m. start time, in order to serve breakfast. Breakfast and food in general is a growing category for many fast food companies, according to Brown.
“This strikes me as a relatively low-risk channel to explore, especially if the technology bears out.”
“While breakfast has been a strong suit, we’ve seen roughly one-third of coffee orders come after lunch,” says Prahar Shah, the head of business development at DoorDash. Office deliveries are popular. “We see three to four folks on a team doing the ‘coffee run,’ but doing it with DoorDash.” Dunkin’ Donuts’ Box ‘O Joe, which holds 10 cups of coffee in a box, are popular with the late-afternoon office crowd, says Shah.
This partnership has expanded from Dallas to Washington DC, Chicago, Atlanta, and Los Angeles/Orange County. And Dunkin’ Donuts is looking to expand delivery, with or without DoorDash. “As we continue to test Dunkin’ Delivery, we will look to explore options for other partnerships and integrations with the DD Mobile App,” writes Sherrill Kaplan, who works on digital marketing and innovation at Dunkin’ Brands.
“Both companies have made big strides in their app development and mobile ordering platforms, and it makes perfect sense that they would try to leverage that loyalty through a new channel,” such as delivery, writes Brown, the Roast editor. “This strikes me as a relatively low-risk channel to explore, especially if the technology bears out.”
And it isn’t easy to grab a meal on the go when you’ve got young children in the back seat.
A number of Chick-fil-A restaurants across the nation are offer a service called “Mom’s Valet” in which parents can order meals from the drive-through, then park. By the time they’ve got the kids out of the car, a table is waiting for them with their food and high chairs inside.
Not all Chick-fil-A restaurants in Tampa Bay offer the service, but the ones on St. Pete Beach and on Gulf to Bay Boulevard in Clearwater do. Another one on Waters Avenue in Tampa will start offering it next week.
The program started at one Chick-fil-A a while ago, said company spokeswoman Bekki Poelker, and has since grown to more than 100 of the company’s 1,900-plus U.S. locations.
The service is free. Parents who want to use it just need to say so when they place an order at the drive-through. An employee will be waiting for them inside to serve their food.
“We’ve seen some services in fast food, like White Castle, which sometimes takes reservations and dresses up tables on Valentine’s Day, but for the most part, you don’t see a lot of this,” said Darren Tristano, executive vice president of Technomic, a Chicago-based food research firm. “It’s a great accommodation for parents, and from the Chick-fil-A brand standpoint, it fits well with their very specific philosophy with religion and family.”
The service received national attention earlier this month when a franchisee-owned restaurant posted about it on Facebook and it went viral.
“Our hope is that with ongoing improvements to our mobile ordering app, all customers will have access to this level of convenience at their fingertips in all locations in the future,” Poelker said.
Similar to Publix or Nordstrom, Chick-fil-A is a brand that has a cult-like following. When new stores open, fans camp in the parking lot for a chance to win free Chick-fil-A for a year.
In October, the Chick-fil-A on St. Pete Beach hosted an all-you-can-eat chicken nugget promotion, which received hundreds of thousands of shares and likes on social media.
In 2015, Chick-fil-A was named the No. 1 restaurant based on customer satisfaction by the American Customer Satisfaction Index. Chipotle was a close second.
At this point a couple years ago, if you asked a restaurant executive how she might user Uber to build sales, she might have guessed as a prefix for the name of her brand’s Oktoberfest-theme burger. But now, Uber and Postmates are just two of the sharing-economy apps rapidly transforming foodservice and shaking up consumers’ expectations everywhere.
Going into 2016, there are dozens of similar forces shifting the ground beneath restaurants, and most of them are far beyond what brands have the power to control. While they are hard to predict, even for a data-rich firm like Technomic, they are easy to identify and understand, because they all spring from evolving consumer demand. Major moves from the biggest restaurant companies—McDonald’s moving its food supply toward more cage-free eggs, for example—aren’t dictated solely by the bottom line. They’re dictated by what consumers need from foodservice brands.
Technomic just released its 10 major food trends for 2016 with this dynamic in mind. Because consumers are the impetus behind all the upheaval, take a look at each trend and see how many of them you’re driving with your own dining out preferences.
The Sriracha Effect: This hot sauce from Thailand will continue to grow in popularity, but the “effect” Technomic predicts is that chefs and chain restaurant executives will search for the next hot ethnic flavor to find lightning in a bottle again. Early indications are that this will drive more use of and consumer interest in ghost pepper from India, sambal from Southeast Asia, gochujang from Korea, and harissa, sumac and dukka from North Africa.
The Delivery Revolution: Popular apps that simplify online and mobile ordering making “dining in” even easier and, in some cases, “dining out” irrelevant. Delivery services like GrubHub are starting to proliferate far beyond urban centers, bringing the convenience of a restaurant meal home, where plenty of people are likely camping out in front of the TV to binge-watch a season or two on Netflix. Other services are muscling in, including the aforementioned Uber and Amazon, which is expanding its Prime Fresh memberships for grocery delivery.
One particular threat to restaurants could be app-only services like Munchery, which delivers restaurant-quality food from a commissary, cutting out brick-and-mortar restaurants completely.
Negative on GMOs: In some cases, consumers have made up their minds before scientists have reached consensus, but many restaurant customers are declaring genetically modified organisms to be nonstarters. Many diners will agree with calls for labels of GMOs on menus and food packaging; some will go further and gravitate toward restaurants that advertise a GMO-free menu. That will be a major issue for the nation’s food supply, since many crops—particularly soy fed to livestock and other animal feeds—have been modified to boost their yields and productivity.
Modernizing the Supply Chain: Speaking of the supply chain, it already has enough challenges to deal with, including climate destabilization, rising costs for transportation and shipping, and pests. These will cause frequent repeats of shortages similar to those witnessed in 2015, like the unseasonable freeze that decimated Florida’s orange crop or the egg shortage that resulted from avian flu. Those hurdles will proliferate while more and more consumers demand food that is “fresh,” “local,” or just free of additives and artificial ingredients. Every brand, from restaurants to grocery stores and convenience stores, will make big investments in supply chain management in 2016.
Year of the Worker: Restaurants will also contend with rising labor costs, because of new mandates to cover full-time staff with health insurance and because the minimum wage could increase sharply depending on the state or city where they’re located. Pressure groups will ratchet up their call for a $15-per-hour wage, and they could possibly succeed in more cities like they have in New York and Seattle. Don’t expect any changes to the federal wage floor of $7.25 per hour, because no cooperation between a Democratic White House and a Republican Congress is possible, especially in an election year.
How will restaurants respond? Most will raise their wages to either comply with a new law or to compete for the best staff—but that means menu prices are going up as well, everywhere from fast food to fine dining. Also, more brands will experiment with technology and automation in the kitchens and the dining rooms to do more with fewer employees.
Fast Food Refresh: Consumers gravitate to “better” quick-service restaurants, which has transformed the industry. That has created a subset of “QSR-Plus” concepts with fresher menus and more contemporary designs, which exploits a price threshold between fast food and fast casual. Culver’s, Chick-fil-A and In-N-Out Burger are examples of this. “Build-your-own” menus are springing up across the industry, and many quick-service brands are adding amenities like alcohol.
QSR-Plus also helps other restaurants clarify their positioning by giving up their attempt to go upscale in a piecemeal approach, and those chains instead are returning to their roots with simplified menus and lower prices.
Elevating Peasant Fare: The popularity of street foods and consumers’ demand for portability and affordability have put things like meatballs, sausages and even breads back in the spotlight. But this time, those meatballs might have a nouveau twist, such as a blend of fancier meats like duck or lamb. Multiethnic dumplings will also continue to grow in popularity, from Eastern European pierogi to Asian bao.
Trash to Treasure: Rising prices for proteins will raise the profile of underused cuts of meat, organ meats or “trash fish.” The “use it all” mindset has also moved beyond the center of the plate. Some restaurants will use carrot pulp from the juicer to make a veggie burger patty, and perhaps other chains will follow the lead of Sweetgreen, which last year partnered with celebrity chef Dan Barber to make the wastED Salad, an entrée that saves vegetable scraps like broccoli stalks and cabbage cores and combines them with upscale ingredients like shaved Parmesan and pesto vinaigrette.
Let them eat kale stems!
Burned: Smoke and fire are showing up everywhere on the menu—smoky is the new spicy. Look for more charred- or roasted-vegetable sides, desserts with charred fruits or burnt-sugar toppings, or cocktails featuring smoked salt, smoked ice or smoky syrups.
Bubbly: Effervescence makes light work of the trendiest beverages. Technomic expects rapid sales growth of Champagnes and Proseccos, Campari-and-soda aperitifs, and adults-only “hard” soft drinks like ginger ales and root beers. In the nonalcoholic space, sales will also increase for fruit-based artisanal soda and sparkling teas.
Stuffed crust isn’t the only battle ground for Domino’s Pizza Inc. and Pizza Hut. The chains are promoting smartwatches, connected cars, retinal scanning and other interactive technology for order and delivery – and learning what works and what doesn’t in customer experience.
Ordering pizza is a time-honored proof of concept for new technology. The very first retail purchase on the Web was a Pizza Hut pizza, the company claims. Now it and Domino’s are experimenting with just how much change customers can tolerate as technology remakes the noble task of ordering a pepperoni pie. Domino’s, for example, lets customers order in Ford Fiestas with voice commands and on Pebble smartwatches with a touch interface. Pizza Hut lets gamers order through their Xbox and in the United Kingdom is testing retinal scanning technology that detects where a customer’s eyes rest on a digital menu board and adds toppings accordingly.
“Pizza companies are paving the path for technology in other kinds of restaurants,” says Darren Tristano, an analyst at Technomic Inc., a food industry consulting firm.
And both companies watch the tech moves of one another — and those of other retailers – closely. Domino’s CIO Kevin Vasconi says customers will jump to Pizza Hut or another competitor the moment an ordering system hiccups. “If you’re on Dominos.com and not having the best experience, it’s not hard for you to go to one of our competitors,” Mr. Vasconi says. “We want to not only have best experience in your car, but on your watch and in other venues, too.”
Pizza Hut is building an in-car ordering and payment system with Accenture and Visa Inc., which announced the project Monday at the Mobile World Congress in Barcelona. Testing is expected to start this spring. The system’s beacon technology can alert restaurant staff when the customer pulls into the parking lot, says Carol Clements, U.S. CIO for Pizza Hut, which accounted for $1.1 billion of the $13.3 billion in sales reported last year by parent company Yum Brands Inc.
Anticipating customer behavior influences where Pizza Hut invests, Ms. Clements says. Aside from drivers, IT is the fastest growing part of the business. Pizza Hut wants to add 100 people, including contractors, to its 160-member technology and digital staff, focusing on analytics talent and mobile developers to build out tablet and self-service kiosk apps. But not every new technology is ripe, she says, including wearable devices. “When you’re ordering a pizza, there’s a lot of information we need. Whether we can do that on a little, 2-inch by 2-inch watch in a way not frustrating for customers, we’ll continue to evaluate.”
At Domino’s, tech investments must pay off in sales, conversion rates or new-customer acquisition, Mr. Vasconi says. About half of its $2 billion in 2014 sales came from digital platforms and half of that was from mobile devices, he says. At 200 people, IT is one-third of the company’s corporate staff and they want to hire 50 or 60 more this year. Domino’s measures itself against Pizza Hut and other competitors, looking at website load time, number of steps to order and user-interface design. But Mr. Vasconi also studies innovators outside the pizza business, including Zappos.com and Uber. (He promises no surge pricing on pizza.)
A partnership with Ford Motor Co. to use the Sync AppLink connectivity system lets drivers in Fiestas, Mustangs and other cars order Domino’s with voice commands. But it’s not a high-traffic ordering vehicle, Mr. Vasconi says. ”Customers say it’s a great idea but they’re not going to use it every day.”
Still, it’s one more avenue for orders, and being everywhere can increase customer loyalty, Mr. Tristano says. “People want the ultimate convenience of being able to get what they want when they want it.”
Starbucks Corp. (SBUX) sold about 16 percent more gift cards in the U.S. during the 2014 holiday season as shoppers increasingly defaulted to the fail-safe option of treating their loved ones to lattes and Frappuccinos.
About 37 million gift cards were sold during the holiday season this year, up from about 32 million last year, the Seattle-based company said in an e-mail. More than $1.1 billion was loaded onto Starbucks gift cards between Nov. 3 and Dec. 25 in the U.S. and Canada, where a combined 40 million cards were sold, Starbucks said.
The world’s largest coffee-shop chain, with almost 12,000 cafes in the U.S., is an easy choice for consumers seeking the convenience of gift cards, said Darren Tristano, executive vice president at Chicago-based research firm Technomic Inc. Its stores are everywhere, and many customers visit almost daily.
“It becomes a safe bet,” he said. “We don’t want to give gift cards to people that we’re not sure they’re going to use.”
In 2013, Starbucks customers across the globe loaded $1.4 billion onto gift cards, including $1.3 billion in the U.S. and Canada, between October and December. Starbucks hasn’t yet released numbers for the corresponding period in 2014.
Starbucks said almost 2.5 million gift cards were activated on Christmas Eve this year, up from nearly 2 million sold that day last year. More than $20 billion has been loaded onto Starbucks gift cards since the program originated 13 years ago, the company said in a press release before Christmas.
The gift-card program reached new heights this year when the coffee chain sold a $200 Starbucks Card keychain that’s made with sterling silver and comes loaded with $50. The item sold out online and was available only in limited quantities at certain stores nationwide. Starbucks also offers monogrammed cards for $5.
Gift cards increase the amount of money customers spend when they’re in a Starbucks store, and the company should see a boost in sales in the first part of the year as coffee drinkers start to redeem the cards, Tristano said.
“It’s a significant part of what they do,” he said.