Starbucks Canada sees Quebec as final frontier

By S. John Tilak

TORONTO (Reuters) – An eastern expansion drive is brewing at Starbucks Canada.

Colin Moore, Starbucks’ Americas president, said the world’s largest coffee chain is targeting the French-speaking province of Quebec and the Atlantic provinces to the east of it, which together he sees as a huge untapped market.

Starbucks Corp (SBUX.O: Quote, Profile, Research) opened its first Canadian store in Vancouver — a three-hour drive from its Seattle headquarters — in 1987, and most of the 1,070 stores the company now operates in Canada are in Ontario and the Western provinces.

It has fewer than 50 stores in Quebec, a market that has traditionally been a tough one to crack for non-francophone businesses.

“We have aggressive growth plans for Quebec and the Atlantic provinces,” Moore told Reuters in an interview.

He said the push could see Starbucks bring its Quebec store count to more than 200, but did not say when expansion to that number would be complete.

Quebec has “a good espresso consumer cafe culture” and would be “a great fit for Starbucks,” he added.

Moore, 55, oversees Starbucks’ operations in Canada and Latin America and is based in Toronto.

Starbucks opened its first Toronto store in 1996 and expanded rapidly. It has 340 stores in Ontario.

The growth has resulted in market share improvement.

“We’re making gains in the total share of stomach,” said Moore, a Canadian who says his favorite drink is a vanilla latte. “We’re far and away the largest player in the specialty category.”

The company’s main rivals in Canada are Second Cup Ltd (SCU.TO: Quote, Profile, Research) and Tim Hortons Inc (THI.TO: Quote, Profile, Research). Second Cup has about 350 stores. Tim Hortons, an iconic name in the country, has more than 3,000 restaurants in Canada.

Starbucks’ expansion plans come as the price of coffee beans soars and coffee chains raise prices globally. Starbucks is only major coffee chain in Canada that has not announced plans to pass on the higher cost of the commodity to its customers.

“We’re trying to hold the line on pricing,” Moore said, adding the company has enough inventory globally to take it through to September.

Moore said Starbucks was also pursuing more growth in Latin America, where many of the countries are coffee producers.

Brazil, a coffee-producing country, is likely the company’s most underserved market.

“Brazil is a huge opportunity – coffee drinking, coffee producing, very strong economy, strong currency. We have a very embryonic presence in the country,” Moore said. Starbucks has only 25 stores there.

“It is destiny that Brazil would be a larger market for Starbucks than Canada over time,” said Moore, who is looking at a five- to 10-year horizon for that to play out.

(Reporting by S. John Tilak; editing by Peter Galloway)

Starbucks Canada sees Quebec as final frontier