Dive Brief:

• Food purchases are playing a growing role in Starbucks’ North American strategy, with food now accounting for almost $6 billion in sales in the region in FY 2023, the company said during an investor presentation Thursday evening. 
• About half of those food sales are driven by the company’s all-day breakfast items, including sous vide egg bites, breakfast sandwiches and breakfast wraps. The chain wants to improve its offerings in other dayparts, however.
• Brady Brewer, the company’s chief marketing officer, said that “in service of driving afternoon and all-day visits,” Starbucks “will expand with new all-day snacking platforms and introduce an elevated fresh baked offering over time.”

Dive Insight:

Starbucks customers, Brewer said, are looking for “wholesome and premium” snacks. Brewer did not say what sorts of snacks counted as wholesome or premium, but did say the company was offering “lower-calorie, plant-based wholesome products to meet our customers changing needs,” across beverage and food categories.

Brewer said the snacking category has grown to a $110 billion market, presenting significant opportunity for Starbucks to add products. Sales of the company’s all-day breakfast offerings grew 20% in the fiscal year, and 26% in the afternoon daypart, indicating that many Starbucks customers are looking for something to eat between lunch and dinner.

Dayparts outside of chains’ core operating hours have been a focus this earnings season. Pizza Hut announced last month that it was pushing to keep thousands of its stores open to midnight or later, while Wendy’s is looking to late-night as a key traffic driver.

Menu innovation is an important element in transforming latent consumer demand into sales at unexpected times. Denny’s, hard-pressed by falling traffic, is looking to add a burrito virtual brand to bolster its sales during off hours, while Wendy’s new breakfast items, like English muffin sandwiches, have helped the burger chain improve its morning sales. Marco’s Pizza stepped into the handheld pizza race last week with a menu item tailored for on-the-go lunch and for snacking: the Pizzoli.

While Starbucks is focusing on the afternoon, rather than late-night, new menu items will still be key in establishing the chain as a go-to option for customers outside the normal coffee drinking hours.