Starbucks Will Roll Out Delivery In More US Cities

Starbucks (NASDAQ:SBUX) is expanding the U.S. delivery pilot program it debuted in Miami to six additional cities. In partnership with Uber Eats, it will begin offering the service in San Francisco immediately and add select company-owned stores in Boston, Chicago, Los Angeles, New York, and Washington, D.C., in the coming weeks.

Customers will be able to order more than 95% of items on the Starbucks menu, including customized beverages, and have them delivered within 30 minutes, according to a press release. The chain says it plans to offer delivery from 25% of company-owned stores in the seven cities by the spring. The coffee giant also plans to test what it has dubbed Starbucks Delivers in London later this month; Uber Eats will be its partner for the service in Europe as well.

"We know we have untapped customer demand for Starbucks Delivers in the U.S. and starting today, we're expanding our best-in-class experience to our customers both in and out of our stores," said COO Roz Brewer in a press release.

Why more delivery?

In a crowded marketplace, a growing number of restaurant chains are looking to delivery as a tool to increase same-store sales. And the coffee giant is hardly the only major player to sign a deal with Uber Eats rather than building out a delivery infrastructure and hiring drivers of its own; McDonald's has also partnered with the fast-growing service. Starbucks, however, is not simply relying on Uber Eats' technology.

"We're building on key learnings from past delivery pilots and by integrating our ordering technology directly with Uber Eats," said Brewer. "We've unlocked the ability to bring Starbucks to customers for those times when they're not able to come to us."

Nor will delivery be limited to the U.S. and Europe. Indeed, the company already offers some form of delivery service in 11 of its global markets, and plans to expand that this year. The company called global online food delivery a $95 billion opportunity, and noted that the market is projected to grow by upwards of 11% annually through 2023.

In China, the chain's fastest-growing market, Starbucks already offers delivery from all of its Beijing and Shanghai locations, as well as stores in 11 other cities, through a partnership with Alibaba that uses its Ele.me platform.

"The team in China is working at an unprecedented pace to bring Starbucks Delivers to more than 2,000 stores across 30 cities by the end of this calendar year," said International Group President John Culver during the fourth-quarter earnings call.

In the U.S., delivery carries a $2.95 fee; orders can be placed through the Uber Eats app. The company has also begun to deliver from some Tokyo stores, and has tested the service in Hong Kong, India, Indonesia, Singapore, Vietnam, Chile, Colombia, and Mexico.

A measured rollout

In the U.S., Starbucks has thus far confined its delivery pilot program to densely populated cities where the chain has a significant presence. That makes it possible to offer the service without integrating it into every store within a given market.

Early results clearly show that delivery drives incrementally higher sales, but the company will have to continue to examine how to execute. Balancing the needs of in-store and delivery customers, for example, will require it to gather data and figure out ordering patterns to inform staffing, inventory, and other decisions.

Starbucks obviously plans to embrace delivery in the U.S., but its cautious pace suggests recognition within the company that it doesn't have all the answers yet. Moving ahead at a judicious pace may help it avoid missteps, so that it doesn't squander a potentially large opportunity.

This article originally appeared in the Motley Fool.

Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.