Starbucks to skip 'Frappuccino Happy Hour' in U.S. this summer

By Lisa Baertlein

LOS ANGELES (Reuters) - Starbucks Corp has told employees it is taking its Frappuccino Happy Hour special off the menu in the United States this summer, as it shakes up its promotions in a bid to strengthen sales after a disappointing holiday season.

The world's biggest coffee chain has been struggling with decelerating same-store sales in its dominant U.S. market and weakness in the afternoon and evening hours - and has put some of the blame on its Frappuccino promotions.

"As part of our updated approach to products, events and offers, a different approach to summer offers will be planned that does not include Happy Hour," the coffee chain said in its recently released Spring Partner Planning Kit for U.S. employees.

Company spokeswoman Haley Drage confirmed the language in the communication to employees but said Starbucks is not canning Frappuccino Happy Hour. She declined to elaborate. Starbucks for several years has offered some form of Frappuccino Happy Hour, which is popular with customers but not baristas.

Frappuccinos are sweet, icy, blended drinks that are more labour-intensive than many of the company's other beverages. Last year's U.S. promotion offered half-priced Frappuccinos from 3 p.m. to 6 p.m., from May 5 to May 14.

That special resulted in "a lower-than-expected lift in nondiscounted Frappuccino beverages following Happy Hour," Chief Financial Officer Scott Maw said on a conference call with analysts in July 2017.

Executives told analysts last week that Starbucks' cafe sales in Japan are being weighed down by softness in limited-time offers, particularly on Frappuccino drinks.

On Thursday, Starbucks warned that 2018 global same-store sales growth would be at the low end of its forecast, after holiday merchandise and limited-time seasonal drinks fell flat with U.S. customers during what is traditionally a blockbuster year-end quarter.

Chief Executive Kevin Johnson said Starbucks' strategy for boosting sales includes focusing on drinks such as iced coffee, tea, cold brew and draft beverages such as Nitro Cold Brew, which are more popular in the afternoon. To that end, Starbucks is speeding up the roll-out of its hipster Nitro Cold Brew to 2,300 stores in the United States by the year from 1,300 stores currently. Nitro coffee, which looks like dark beer, is infused with nitrogen gas, stored in a keg and served from a tap.

Starbucks has nearly 14,200 cafes in the United States. Analysts worry it is also being pressured by stepped-up competition and some are concerned it is opening too many new cafes in the United States.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Matthew Lewis)