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Current as of 16/09/14 07:40PM NZST

Christopher Adams

The Business Herald’s markets and banking reporter.

Struggling Starbucks lowers coffee prices

Starbucks is offering free extra espresso shots. Restaurant Brands' Russel Creedy says the aim is to get more customers through the doors. Photo / Supplied
Starbucks is offering free extra espresso shots. Restaurant Brands' Russel Creedy says the aim is to get more customers through the doors. Photo / Supplied

Starbucks, which has long been a struggling division of NZX-listed Restaurant Brands, has dropped its coffee prices and is offering free extra espresso shots in a bid to reverse declining sales.

Last week the 33-store cafe chain reported a 5.1 per cent drop in second-quarter total sales to $7.5 million, compared with a year earlier.

Restaurant Brands' two other businesses - KFC and Pizza Hut - lifted total sales by 1.8 per cent and 9.5 per cent, respectively, in the same quarter.

Chief executive Russel Creedy said Starbucks had dropped its retail coffee pricing by about 10 per cent, while also offering free additional espresso shots, to drive consumer interest in the chain.

"We're trying to get more customers in the door and make it more affordable."

Creedy said the drop in retail pricing was not a sign of desperation.

"We're really looking to change customers' perceptions [of Starbucks]," he said, adding that the chain had an "entirely new" range of food on offer.

Jon Bird, chairman of retail marketing specialists IdeaWorks, said Starbucks had always struggled to gain traction with Kiwi consumers because this country already had a strong coffee culture when the chain first launched here in 1998.

"There's no great reason for [having] Starbucks in New Zealand," he said. "That kind of American cultural imperialism, when it comes to coffee, just doesn't work in New Zealand."

Meanwhile, Creedy said KFC's launch of a chicken pie earlier this year had proved a great success and the fried chicken chain was working on new pie-related opportunities.

That could involve new flavours or even a family-sized pie, he said.

And the roll-out of the firm's fourth brand - American burger chain Carl's Jr - is imminent.

Creedy said Restaurant Brands would open its first Carl's Jr in Mangere town centre in November, followed by another store in Palmerston North in December.

A third Carl's Jr store was set to open in Queen St in Auckland in January.

Creedy said the company hoped to eventually operate up to 60 Carl's Jr outlets nationwide.

The burger chain had the potential to outstrip KFC's sales on a per store basis, he added.

An existing franchisee, part-owned by former All Black Michael Jones, already operates two Carl's Jr stores in Auckland's St Johns and Takinini and has the rights to open six more outlets in the city.

- NZ Herald

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