Cold drinks are hotter than ever at Starbucks

• Cold beverages continue to be a fan favorite at Starbucks.
• Food is also boosting sales. Two out of every five customers are buying food with orders.

Starbucks grew into a multibillion-dollar coffee business selling hot java. But today, cold drinks are hotter than ever at that coffeehouse chain.

Cold drinks accounted for 75% of beverage sales in the company's third quarter.

"We're particularly encouraged to see cold espresso beverages were up 13% year over year," CEO Laxman Narasimhan said during the chain's third-quarter earnings call on Tuesday.

Cold foam, in fact, is the fastest-growing add-on at Starbucks, he said. Add-ons, also known as modifiers – such as sugary pumps of syrups, extra espresso shots, and sauces – are a $1 billion business for Starbucks.

"Over 60% of beverages were customized, representing a 9% growth when compared to just five years ago," Chief Financial Officer Rachel Ruggeri said.

As such, Starbucks is investing more in its cold beverage program.

Narasimhan, who took over as CEO in March, said the chain has rolled out "faster and easier to use" portable handheld cold-foam blenders to all company-operated cafes in the US. He called it one of the fastest equipment rollouts made in the US.

Narasimhan said Starbucks Refreshers platform is also performing well all day, not just in the afternoon. The platform "has seen double digit growth this past quarter in every daypart," he said.

The chain leaned into the refresher program with the recent June rollout of frozen Refresher beverages. The flavors include Frozen Pineapple Passionfruit Lemonade, Frozen Strawberry Acai Lemonade, and Frozen Mango Dragonfruit Lemonade.

"It's a big and sizable business," Narasimhan said.

Also fueling sales is food.

Two out of every five customers are attaching food with orders, up 25% from five years ago, and representing an "all-time high food attach," Ruggeri said.

That's led to record check averages, which Ruggeri said "drove the highest average weekly sales in our company's history, surpassing the all-time high set during holiday in the first quarter of fiscal year 2023."

Customer visits are also up. "We are seeing more customers come into our stores with customer counts up 5% year over year in line with a record high set in Q1 of this fiscal year," Ruggeri said.

Starbucks Rewards members in the US increased to 31.4 million in the third quarter, up 15% year over-year. North America and US same-store sales, a metric that tracks a chain's financial health, increased 7% in the quarter. The boost in sales was driven, in part, by a 6% increase in the average ticket.

Are you a Starbucks barista or insider with insight to share? Got a tip? Contact this reporter via email at nluna@insider.com.