By Courtney Dentch

June 30 (Bloomberg) — Starbucks Corp., the world’s largest coffee-shop operator, is introducing food without preservatives and additives today to entice more customers to include a muffin or sandwich with their latte order.

Fresh Oregon blueberries are replacing artificial ingredients in muffins and baked goods, while the Marshmallow Dream bar will come without high-fructose corn syrup, said Sandy Stark, vice president of the food division. Two salads, an egg- white breakfast sandwich and a strawberry-banana Vivanno smoothie round out the new food options in U.S. stores.

“We really wanted to up the quality of our food,” Stark said in a June 26 telephone interview. “We wanted something that we could be as proud of as we are with our coffee, and we knew we had a long ways to go.”

The new foods are appearing after more than a year of testing and reworking recipes with a focus on healthy, natural ingredients, Stark said. Last year, the company redesigned its breakfast sandwiches following complaints that the smell overpowered the coffee aroma in stores.

Food accounted for 15 percent of the Seattle-based company’s sales of $10.4 billion in the year ended in September, according to a regulatory filing. Starbucks coffee ranked first among fast-food chains in a Zagat survey this month.

‘Indulgent’ Treats

“People aren’t going there for the food, aside from the indulgent” treats, said Tom Forte, an analyst with Telsey Advisory Group in New York. He has a 12-month price estimate of $12 to $14 on the stock. While Starbucks isn’t likely to become a food destination, “anything they can do to drive incremental traffic would be a positive,” he said.

Starbucks rose 11 cents to $14.64 yesterday on the Nasdaq Stock Market. It has gained 55 percent this year.

The altered recipes, which cover about 90 percent of foods sold at the chain, won’t lift prices for customers, Stark said. The shift cut the manufacturing costs of some of the foods, she said. Stark declined to elaborate or comment on the impact on profit margins.

After reworking the breakfast-sandwich formula last year, the company began selling $3.95 combination meals this March featuring a coffee or latte paired with oatmeal, coffee cake or an egg sandwich. The move came less than a year after Chief Executive Officer Howard Schultz said he wouldn’t take the “fast-food lane.” The chain is facing growing competition for coffee-drink sales from McDonald’s Corp. and Dunkin’ Donuts Inc.

“With the incremental pressure McDonald’s is placing on them, it gives them more incentive to get it right,” Telsey Advisory’s Forte said.

To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net.
Last Updated: June 30, 2009 05:30 EDT

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