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Starbucks to Expand Delivery Services Nationwide With Uber Eats

Zacks Equity Research

In a bid to drive sales, Starbucks Corporation SBUX is leaving no stone unturned. Recently, the company inked a deal with Uber Eats to roll out Starbucks Delivers across the United States by early 2020.

Notably, the latest move follows Starbucks Delivers' successful operational integration by Uber Eats San Francisco, Boston, Miami, Chicago, Los Angeles, New York and Washington, D.C. Currently, Starbucks Delivers powered by Uber Eats is available in 11 U.S markets. This apart, digital initiatives like mobile order/pay, delivery services and third-party loyalty partnerships should stimulate the company’s robust sales trends in the Americas segment. The partnership will help Starbucks expand its customer base.

Digitalization: The Need of the Hour

Per eServices report, global online food delivery is $95-billion market value and is likely to grow by 11% annually through 2023. Moreover, the U.S. online food delivery market, estimated at nearly $17 billion in 2018, is likely to increase to $24 billion by 2023.

In recent times, Starbucks has been focusing on expanding delivery services globally. Evidently, the company has stared online delivery services in China, Japan, India, Hong Kong, Singapore, Indonesia, Vietnam, Mexico, Colombia and Chile. These efforts are aimed at capitalizing on the robust online food delivery market. In 2018, Starbucks announced a historic partnership with Alibaba in order to provide seamless Starbucks Experience. Following the deal, the company began delivery services in Beijing and Shanghai via Alibaba's Ele.me platform.

By the end of 2019, the company expects to expand Starbucks Delivers to 3,000 stores across 50 cities in China. Starbucks' business in China is rapidly growing due to innovative store designs, local product innovations and the success of the MSR program.

Meanwhile, the company is strengthening its product portfolio with significant innovation around beverages, refreshment, health and wellness, tea and core food offerings. Notably, beverage innovations have been a significant contributor to comps growth for Starbucks over the years. Apart from the numerous beverage innovations, Starbucks’ efforts to offer more nutritional and healthy products to its customers are commendable.

In the past six months, shares of this Zacks Rank #2 (Buy) company have surged 34.4% compared with the industry’s 19.2% growth.

Other Key Picks

A few other top-ranked stocks that warrant a look in the same space include The Habit Restaurants, Inc. HABT, Papa John's International, Inc. PZZA and Denny's Corporation DENN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Habit Restaurants and Papa John's has an impressive long-term earnings growth rate of 20% and 12.5%, respectively.

Shares of Denny's have gained 14.3% in the past three months.

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