In the video below, Motley Fool CEO Tom Gardner sits down with Starbucks Corporation (NASDAQ:SBUX) CFO Troy Alstead during a recent visit to Starbucks headquarters in Seattle. In this portion of the video, they discuss the massive international opportunities for Starbucks, particularly in China and India. Alstead says that China will be Starbucks’ second biggest market within the next couple of years, and that stores in India have seen huge demand after opening two months ago.
A full transcript follows the video.
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Tom Gardner: Let’s talk about international. You were very involved in international as part of your journey here to becoming [CFO] at Starbucks, and very involved in China. So let’s start with China. What is the potential market size? I know you call it your second home, your future second home, your future second home market at Starbucks Corporation (NASDAQ:SBUX) is China, so what do you see as the potential and where, for example, do you think operating margins can go for the Chinese locations?
Troy Alstead: China, as you’ve heard us say, and as we’ve articulated publicly, is a huge opportunity. We’ll have thousands of stores there at some point. How many specifically? Hard to say. We have put out a public target to say a few years from now we’ll hit 1,500 stores on mainland China and at about 700 or 800 stores today, we’re well on the pace to get there. But that’s just a milepost to what is a much, much bigger opportunity, and that is even before we start talking about going outside of the Starbucks store with our products in other channels that has been so powerful for us in our more mature markets over time.
So China is a tremendous opportunity. What’s interesting about China, and I think this is an important reflection as we look at the whole world, coffee consumption in China is very, very low. Coffee consumption before we entered and the whole idea of this Starbucks Corporation (NASDAQ:SBUX) store, this coffeehouse environment that we offer, was unknown, it was unheard of to a large extent.
Starbucks coming in and now a few others coming in around the edges, has really introduced to that consumer this experience, a place, all the things that other customers in other markets around the world have come to embrace over time, we are seeing that happen rapidly in China, and adopting our beverages, the innovation, and the experience in-store.
People are using it for business meetings, they’re using it for dates, they’re using it for a place to be and work. It is becoming a part of the habit of and the fabric of life in China just as it has here over the years. It’s the depth of that connection point that gives us the most confidence of all. But we have, again, thousands of stores to be had at some point in time on the right scale, on the right frequency, but at some point in time, big business to be had for us.
Tom: I mean, do you anticipate that there is a point in the next quarter-century where China is driving more revenue than the U.S. for Starbucks Corporation (NASDAQ:SBUX), all in?