Promotional photo of Starbucks' coffee. / Starbucks Promotional photo of Starbucks' coffee. / Starbucks

Starbucks Runs Into Early Troubles With Uber Eats Partnership

Starbucks is taking on delivery in the U.S. and China with the help of Uber Eats and Alibaba Group. But the company claims not enough time has elapsed to deem Starbucks Delivers a success just yet.

Some unexpected obstacles have also come into play, according to Rosalind, Brewer, COO and group president of the Americas. Starbucks has found it is better equipped to deliver some drinks better than others in the U.S. through Uber Eats.

“We are refining the menu so that we can make sure we understand, when this program is fully rolled out, what the menu needs to be,” said Brewer, who did not specify any beverages by name on a conference call with analysts, Thursday. Starbucks did not immediately return requests for comment.

Starbucks has recently introduced splash-proof lids for hot and cold beverages, tamper-proof packaging seals, and individual hot and cold delivery containers to make delivery feel like an in-store experience for customers. The result has been higher average checks in the early months of its delivery program in the U.S. and China.

In the last quarter ending Dec. 30, a demand for cold beverages also helped the company top analysts’ estimates on same-store sales and revenue.

Growing Delivery

Early headwinds in the U.S. were not enough to keep the company from announcing the expansion of its partnership with Uber Eats to six additional cities outside of Miami in the coming weeks. The two companies are also currently working on software integration, with intentions of making Starbucks Delivers available on the Starbucks Rewards app as well as Uber Eats’ app by the spring. Starbucks already has this configuration available through Alibaba in China.

“One of the things that we learned in Miami are the operational pieces around what needs to happen so that we have effective delivery,” said Brewer. “So that’s what we know at this point, but it was encouraging enough for us to advance.”

Starbucks could look to its partnership with Alibaba in China as an example of how to scale in the U.S. Since launching its partnership with the retail giant in August, Starbucks has expanded Starbucks Delivers to 2,000 stores in 30 cities.

“We’re seeing strong trial, and we’re seeing a growing adoption level from customers,” said John Culver, group president of international operations, adding that the average delivery time is approximately 19 minutes from when a customer orders a drink, to the time they receive it.

Although its Alibaba partnership is further along than Uber Eats, Starbucks considers the full benefits of the agreement to be largely ahead of it, as customer awareness builds.

“I would just say that it’s too early to call exactly what that impact is, but we’re encouraged by the initial results that we’re seeing,” Starbucks CEO Kevin Johnson said. “And we feel as though we’ve got a competitive edge in the market.”

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