Starbucks is rolling out fancy new coffee machines. They may help the company make better coffee, but they won’t improve its financial results. In the near-term, the machines will be immaterial. Longer-term, they’ll likely squeeze margins.
Yesterday, Starbucks (SBUX) unveiled the new machine, The Clover, at several Seattle stores. The Clover is an $11,000 “complex brewing system” that “makes one cup at a time and aims to coax each of the hundreds of flavours known to reside in the average coffee bean.”
In April, SBUX acquired the full rights to the machine from its parent company, The Coffee Equipment Company, in a deal with undisclosed terms. And since it now has ownership of the machine, The Clover will no longer be sold to independent coffee shops, irking cafe owners.
The initial rollout will see the machine in stores in Boston and San Francisco, in addition to Seattle. SBUX has not yet disclosed the price of the new coffees, and it’s hard to imagine they’ll be able to charge more for them than they already charge for the mass-produced stuff.
So will this save Starbucks? Highly unlikely. It might allow the chain to produce better coffee, but at the expense of more labour, more capital spending, and less efficiency, which will translate into lower margins.
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