For Starbucks, More Distracted Diversification Into Restaurants

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Starbucks Corp. (NASDAQ: SBUX), its business prospects slowing, has not learned the lesson that it should stick to what it knows best. Rather, it said it will venture into the Italian restaurant business, immediately after posting poor earnings.

According to the company’s release:

Starbucks Coffee Company announced the opening of the first Princi bakery and café location in the United States at its Starbucks Reserve Roastery in Seattle. The Roastery opened in December 2014 as an homage to coffee, a completely immersive and sensorial space that redefined customers’ expectations of a retail environment. Completing this new customer experience is the introduction of Princi, offering freshly baked Italian food crafted from Rocco Princi’s recipes, which has gained a devoted following in his six stores across Milan and in London’s Soho neighborhood.

Princi will become the exclusive food offering in all new Starbucks Reserve Roastery locations including Shanghai, opening in December 2017, Milan in late 2018, and New York, Tokyo and Chicago thereafter.

As it posted earnings, Starbucks sold off its Tazo tea brand to Unilever for $384 million and said it would shut its Teavana stores, although it would keep Teavana as its tea brand.

The restaurant locations will have their own ovens and dozens of items. It is just the sort of new inventory management, equipment maintenance and new lines of customers waiting for food and coffee that Starbucks needs.

Starbucks has been plagued by overexpansion problems for years, from the sale of merchandise to store overbuilding that hurt it as the global economy dipped. Its share price is flat this year, while the S&P 500 is up 23%.

Whatever happened to selling coffee?