Starbucks Looks to Grocery for Growth

December 2/Seattle/The Toronto Star -- Starbucks Corp. plans to buy companies to build up its grocery business, CEO Howard Schultz said.

The Seattle-based company will look at purchases "large and small," Schultz said at an event in New York.

Starbucks has introduced its Via single-serve coffee product in more locations as Schultz aims to get a bigger percentage of sales from grocery stores. Last month, Starbucks decided to scrap a 12-year packaged-coffee distribution agreement with Kraft Foods Inc. Kraft, based in Northfield, Ill., is fighting Starbucks's efforts with arbitration proceedings.

"There's no question inorganic growth will be a bigger part of our next 10 years than it has been of our previous 10 years," chief financial officer Troy Alstead said during the event.

Acquisitions could include brands "close to what we're about," as well as products complementary to coffee, such as Starbucks' previous acquisitions of Seattle's Best Coffee and Tazo Teas, Alstead said.

Peet's Coffee & Tea Inc. could be a potential target, Stifel, Nicolaus & Co. said in a report.

"When Starbucks and Kraft part ways, Peet's could be a nice fit to deliver Starbucks into the distribution business," the research firm said.

Peet's does not comment on speculation, said spokeswoman Nicole Arena.

Starbucks profit almost doubled last quarter, helped by increasing Via sales and foot traffic in stores. Sales climbed about 10% in the year ended October 3, topping $10 billion (U.S.). The chain had about $1.16 billion in cash and cash equivalents as of that date, almost double that a year earlier.

From the December 20, 2010, Prepared Foods E-dition