Starbucks Whips up a Better-for-You Breakfast

By Bruce Horovitz, USA TODAY

SEATTLE — Starbucks (SBUX) is on the brink of rolling out a serious reinvention of its breakfast food.

Details of the chain's long-anticipated move into better-for-you food — so hush-hush that it had its own code name, Morning Source — will be unveiled Tuesday. It comes as Starbucks' U.S. stores are struggling with drops in traffic and comparable sales growth as many cash-strapped consumers hesitate to shell out $4 for their java fix.

The more nutrition-friendly food — fewer calories, more protein, fiber and fruit — will show up Sept. 3 on the breakfast menu at most of the 11,570 locations in the U.S. and Canada. Six new items include hot oatmeal, an energy bar and a whole-grain apple bran muffin with fruit pieces.

Starbucks plans to revamp its lunch and dinner menus, too, in 2009. The goal is to lure back core customers who are visiting its stores less often and spending less when they do.

"Food has been our Achilles' heel," says corporate founder and CEO Howard Schultz in an interview in his office. He calls better-for-you food, part of Starbucks' evolving health and wellness program, a "billion-dollar" idea. Says Schultz, "This is as big an initiative as anything we can do."

Even so, Starbucks is late to the better-for-you food trend. It's made modest efforts in recent years to bolster the nutritional value of its beverages and foods, such as removing trans fats from its foods and switching to 2% milk. But for the most part, the company has been content to sit back and rake in profits.

The effects of an ailing economy on its sales have left Starbucks little choice but to up the ante on food quality. The move also comes as more cities require fast-food chains to post nutrition information on menu boards.

This year has been a nightmare for Starbucks — and for Schultz, who forcefully took back the CEO job in January. Since then, he's overseen closing 600 U.S. stores, laying off thousands of store and corporate staff, shuffling top management and scaling back domestic growth plans.

Still, Starbucks' stock is down nearly 25% this year. Schultz hopes better-for-you breakfast food targeted at its core customers breaks the bad-news cycle.

But Schultz, 55, concedes to a second driver for the menu upgrade: his own health.

During a physical exam last year, Shultz was strongly advised to lose weight and lower his cholesterol. He immediately replaced his usual breakfast at home of a bagel with butter and black coffee with a homemade protein shake. (He still drinks several Starbucks coffees daily, he says.)

Also, because of achy knees, Schultz recently gave up the pounding of rough-and-tumble basketball for lengthy bike rides.

He's lost 12 pounds since February and looks svelte. His cholesterol is down. He says he feels great. He's also had private consultation with Dr. Mehmet Oz, known for his Oprah appearances. Schultz says that Oz has helped him to view pursuing health and wellness as less a chore than a positive way of life.

He says the menu overhaul will give folks a chance to make "healthier" decisions inside — not outside — Starbucks.

Wooing the regulars

Industry consultant Malcolm Knapp says, "Starbucks is following a fundamental trend: People want to eat better-for-you food that tastes good."

He says Starbucks' real motive is less about selling more food than it is about luring back core customers to sell more highly profitable coffee.

He says it also will help Starbucks better distinguish itself from McDonald's, which now sells premium coffee and plans to install McCafé coffee bars in many of its 14,000 U.S. locations in the next year.

Frequent Starbucks critic and New York University nutritionist Marion Nestle embraces the new menu: "This sounds groundbreaking. If it works, it will influence the whole industry."

For customers such as Lynn Schilaty, mayor pro tem of Snohomish, Wash., it comes not a moment too soon. On a recent afternoon, she took a homemade energy bar to Starbucks, where she sat with a friend drinking iced tea. She says she wouldn't mind paying for baked goods at Starbucks but doesn't find much that appeals to her.

"I come here because I love the coffee," she says. But she says she'd probably go more often if she also loved the food.

Jeff Pettit, a project manager for Boeing in the Seattle area, says he likes Starbucks' food — but not the high calorie count of some items. "I won't touch the doughnuts or scones," he says, noting he checked online and found one scone was close to 500 calories.

Starbucks has heard from lots of customers like these. On its mystarbucksidea.com website, better-for-you food is a top request, says Sarah Osmer, director of health and wellness.

Making the cut

Even before that website went live five months ago, Starbucks regularly heard the request from both customers and employees, says Schultz. The problem: Starbucks' options were limited because Starbucks relies on outside suppliers to make its food.

With more than 70 suppliers nationwide, inconsistent quality also was an issue, Schultz says. To get consistency in the new food, the supplier list has been whittled to fewer than 12, he says.

Before the cut-down, Starbucks challenged all suppliers to help create the new menu. Of 200 food items considered over two years, says Lesley Zavar, director of the food category, these six were selected:

•Oatmeal. The whole-grain Perfect Oatmeal is served hot in a cardboard to-go bowl. For $2.45, buyers also get to pick two of three mixes for the oatmeal (served in separate packs): dried fruit, nuts or brown sugar.

Executives expect the instant oatmeal to be the most popular new item. It will roll out with the promotional tag line: Make Morning Good Again.

Schultz says they "cracked the code" on oatmeal, and its aroma does not detract from the coffee aroma in stores.

Nestle, the nutritionist who's not a fan of Starbucks coffee, says she'll try the oatmeal. But she wishes it was served with fresh, not dried, fruit. "I don't see why they couldn't do that."

•Apple Bran Muffin. The $1.75 muffin with 330 calories is made with whole-wheat flour, oats, wheat bran, apples, cherries and honey. It replaces the current bran muffin.

•Multigrain roll. The $1.60 roll has 280 calories and seven seeds and grains. It's served with almond butter or strawberry preserves.

•Energy bar. The $1.75 Chewy Fruit & Nut Bar is made with oats, dried fruit, nuts, seeds and honey. It has 250 calories.

•Power Protein Plate. The $4.95 Power Protein Plate has a hard-boiled egg (from uncaged hens), a small whole-wheat bagel, a 70-calorie pack of peanut butter, a cheddar cheese wedge, apple slices and grapes. It will be sold at stores that have cold cases.

•Fruit pastry. The $1.75 Berry Stella started rolling out last month. The whole-grain pastry is made with seasonal fruits.

These will be offered in the same place that also still sells a 24-ounce Double Chocolaty Chip Frappuccino (with whipped cream) loaded with 670 calories.

Starbucks executives say it's about choices, which now will include better-for-you grub.

"One year from now, the entire food case will look different than it does today," says Michelle Gass, senior vice president over all Starbucks business categories.

It's working on new beverages, too. Out in July was Vivanno, a $4 fruit smoothie — Banana Chocolate or Orange Mango Banana. Based on early success, more flavors will come in 2009, says Schultz, who drinks two a day.

But organic food is not in the plan. Organic has not been a top request from patrons, Zavar says.

The Baby Boomer factor

The biggest market for the new food may be Baby Boomers "who want to extend their lives without sacrificing taste," Zavar says.

One such Boomer is Beth Hamlin of suburban Seattle. Though a frequent buyer of Starbucks coffee, "Breakfast at Starbucks hasn't been an option for me because of the choices."

Her husband regularly gets its breakfast sandwiches, but she won't touch them because she says they're "too fattening."

With some skepticism, she recently sampled oatmeal being tested at a Starbucks outside Seattle. She was surprised to find she liked it and says she'd buy it.

That's music to Schultz's ears. And, perhaps, future money in the till.

The way he sees it, the health and wellness program will let Starbucks act as a better-for-you food and beverage "editor" for customers. He says the company is being approached by many makers of high-quality foods that want to sell them at Starbucks.

If the new food is a hit, Schultz says, the day will come when he no longer will hear this most common of Starbucks complaints, one he visibly loathes to even say out loud: "The food's not as good as the coffee."

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