Three years after Starbucks moved into the bakery business, the coffee giant has announced a retreat, closing all 23 La Boulange bakeries in San Francisco and the two manufacturing facilities that serve them. Acquired in 2012 for $100 million, La Boulange was deemed "not sustainable for long-term growth," according to a Starbucks press release.
Over the past few years, Starbucks has diversified its offerings, acquiring Evolution Fresh juice in 2011, Teavana in 2012, and launching soda brand Fizzio last year. But with this recent announcement, which also includes closing one Evolution Fresh juice store, it looks like the biggest coffee chain spread itself too thin and is now taking a step back.
While eventually expanding from original products is a core growth strategy for some businesses, Starbucks's latest step back represents a good lesson on smart product additions.
Maximize Your Resources
Adding juice and new baked goods to the Starbucks menu is not necessarily a bold move for stores that already sell coffee and pastries. But acquiring 23 new La Boulange retail stores added expensive weight to the company's business, especially because the stores didn't bear Starbucks' iconic brand name.
With more than 21,000 stores in 66 countries, the world's largest coffee chain already had ample channels for selling new products. And the two manufacturing facilities that served La Boulange were likely redundancies in Starbucks's existing supply chain.
By absorbing new products into existing menus, Starbucks could have avoided the costs of maintaining the La Boulange stores. Now the company is scaling back by adopting this strategy. In yesterday's announcement, Starbucks said it will continue to sell La Boulange products in its stores in the U.S. and Canada.
Find the Right Balance
Though Starbucks will continue to sell La Boulange products in-store, the bakery's founder Pascal Rigo is out. According to the press release, Rigo will focus on nonprofit projects, supplying food for under-privileged children and supporting after-school clinics for children with learning disabilities.
We can only speculate that Rigo has recognized that it's time to let go of the bakery he created. Though the Starbucks release speaks glowingly of the man behind La Boulange, it would be understandable if the founder was disappointed with the fate of his bakery. Whether you are acquiring another entrepreneur's project or putting your own up for sale, it's important to reconcile your expectations with all potential outcomes, whether they are sweet or bitter.