Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Starbucks Corporation (SBUX): Can This Impressive Expansion Last?

Page 1 of 2

There is no doubt that Starbucks Corporation (NASDAQ:SBUX) has become one of the largest coffee companies in the world. In some cities you can find one Starbucks shop in each block. The company has diversified its products, including brands such as Best brand, which commercializes whole-bean coffee, energy drinks such as Refreshers, and even coffee machines with its Verisimo brand, not to mention cups, mugs, and grinding equipment.

No obstacles ahead for Starbucks

Starbucks Corporation (NASDAQ:SBUX)

Starbucks Corporation (NASDAQ:SBUX) seemed to be at the peak of its growth in 2008-2009, posing concerns over its expansion possibilities, but no decline happened. Since Mr. Howard Schultz took the CEO position in January 2008, the coffee company’s stock has grown approximately 220%.

Its geographic expansion was rapid. In 2012 (until September 2012), 234 stores were opened in the Americas region, 10 in EMEA, and 154 in China and Asia-Pacific which amounted to 9,405 company-operated stores. This has significantly diversified risks from the main U.S. market (75% of total revenue came from the U.S. in 2012) and opened new opportunities in China where numerous consumers could increase sales substantially. In 2012, net revenue grew 14% to $13.3 billion compared to 2011, mainly driven by better operating margins and increased sales. Note that these results were helped by low Arabica coffee prices.

What about the competition?

One of its closest peers is McDonald’s Corporation (NYSE:MCD) which has been expanding its McCafe stores to different regions. In Europe, the American company has 1,600 McCafe stores which are separated from the fast food restaurants. Although it is not specifically a coffee company, McDonald’s Corporation (NYSE:MCD) is looking to expand into China and get a piece of the coffee consumer pie, planning to hire 75.000 new employees and increase the total McCafe stores to 750 which signifies a 45% increase. This could be a problem for Starbucks Corporation (NASDAQ:SBUX) as McDonald’s is a fast food giant that could steal some market share in the coffee business.

Another competitor is Dunkin Brands Group Inc (NASDAQ:DNKN), the owner of the Dunkin’ Donuts stores. The company has nearly 17,400 distribution points in over 60 countries and is positioned as one of the leading companies in coffee serving and baked products. As well as Starbucks Corporation (NASDAQ:SBUX), Dunkin Brands Group Inc (NASDAQ:DNKN) is properly diversified across different regions, which makes it safer against economic fluctuations in specific countries. The company has some solid financials as it increased its first-quarter revenue 6.2%, to $162 million, compared to the first quarter of 2012 and its operating income surged 15% to $8.3 million.

Starbucks seems to be the king

Starbucks Corporation (NASDAQ:SBUX) has shown that its business model is somewhat recession-proof. But, the company must be aware of the expansion other companies are planning, especially in Asia, where the market is robust and could drive revenue even higher. Also, the coffee market is exposed to risks related to downturns in the economy as its business model was hurt by the housing decline in Europe. Moreover, Starbucks will have to focus heavily on expansion plans in Asia because having such a concentrated revenue mix (75% of revenue comes from the U.S.) could be dangerous as the economy has not yet fully recovered.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!