Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 

4-Traders Homepage  >  Equities  >  Nasdaq  >  Starbucks Corporation    SBUX

Delayed Quote. Delayed  - 09/29 10:14:59 pm
53.45 USD   -0.98%
01:21a STARBUCKS : Good news for Bluffton shoppers with a pretzel addiction
09/29 STARBUCKS : WKU Topper Corner now open for business
09/29 GLOBE TELECOM : extends free Wi-Fi service to 500 locations
SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector news 

Lingering customers just one hurdle as Starbucks eyes China growth

share with twitter share with LinkedIn share with facebook
share via e-mail
0
04/18/2012 | 08:36am CEST

Starbucks Corp (>> Starbucks Corporation) is on the rise in China with ambitious expansion plans but like any big new emerging market there are teething problems, not least of which is that customers love it so much, they stay for hours and hours and sometimes don't even buy a drink.

Starbucks Corp (>> Starbucks Corporation) is on the rise in China with ambitious expansion plans but like any big new emerging market there are teething problems, not least of which is that customers love it so much, they stay for hours and hours and sometimes don't even buy a drink.

Chief Executive Howard Schultz expects mainland China to overtake Canada as Starbucks' second-largest market by 2014 and some analysts believe it could one day rival the United States as the company's biggest market.

"For a decade the core business was expats and tourists. Without question, the core business today is Chinese nationals," Schultz told Reuters ahead of a trip to Beijing and Shanghai to meet store managers.

The world's biggest coffee chain is a symbol of Western affluence in a nation of tea drinkers. But the tendency for Chinese visitors to linger in cafes and their lower income levels means sales volumes are much smaller than the United States and other markets where taking drinks to go is the norm.

Xu Baoli, a 51-year-old stock trader in Beijing, said he visits Starbucks at least 10 times a month but doesn't go for the coffee. He is taking a break, surfing the Internet and meeting with clients.

Observers note that Chinese customers will bring sometimes their own food to Starbucks and Xu admits that every so often he doesn't bother to buy anything at all.

"I like the concept," said Xu. "Chinese people used to think you needed a spoon and saucer to drink coffee. Now, walking around with a Starbucks cup in your hand has become a fashion statement for Chinese."

With the U.S. market maturing, few prizes are as enticing as China and its population of more than 1.3 billion.

Starbucks entered China in 1999 and now has more than 570 stores in 48 cities. By 2015, it plans over 1,500 stores in 70-plus cities, though that would still only account for about half of China's major cities and would be just a fraction of the 10,800 cafes in the United States.

"It could very well be exactly what's happening with Yum," Michael Yoshikami, chief executive of Destination Wealth Management, referring to KFC parent Yum Brands Inc (>> Yum! Brands, Inc.). The U.S. fast-food company got an early foothold in China and now gets more revenue from that market than any other.

And while Starbucks' China cafes contribute less than 5 percent of company revenue, their store operating profit margins, at around 22 percent, are higher than U.S. cafes because they charge essentially U.S. prices in a market famed for its low labor and other costs.

HURDLES TO GROWTH

But even with that big silver lining, there are big impediments to growth including low incomes, rising costs and the fact that most Chinese don't have a coffee habit.

The market is still small, with specialist coffee shops such as Starbucks booking sales of $358 million from mainland China in 2010, although that was up from $104 million in 2005, according to Euromonitor International. By comparison, the United States accounts for $8 billion in revenue for Starbucks.

Consumers in China drink an average of just three cups of coffee per year, according to an industry study, while for many Starbucks prices are simply out of reach.

Based on average wages in China, it would take 1.3 hours of work in the more affluent east of China to buy a Starbucks tall (12-ounce) caramel macchiato. That goes up to 1.6 hours in the west and 1.9 hours in central China, says Bernstein Research analyst Sara Senatore.

Affordability remains a top concern for analysts, who worry that as Starbucks' expansion progresses beyond the country's biggest cities it will be less able raise prices to protect margins.

But CEO Schultz said income has not been a barrier to growth, adding that Starbucks' shops in non-core markets perform "as well or better" than stores in cities like Beijing and Shanghai, helped by pent-up demand.

Attracting quality employees when competition for skilled workers is intensifying as other chains also seek to expand, is also very difficult, says Paul French, chief China analyst for market research firm Mintel.

To that end, Starbucks has announced plans to launch a training program called Starbucks China University next year. It also will unveil a 1 million yuan ($159,000) fund that will provide emergency financial assistance for Starbucks employees.

(Editing by Edwina Gibbs)

By Lisa Baertlein and Terril Yue Jones

Stocks treated in this article : Starbucks Corporation, Yum! Brands, Inc.
share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on STARBUCKS CORPORATION
01:21a STARBUCKS : Good news for Bluffton shoppers with a pretzel addiction
09/29 STARBUCKS : WKU Topper Corner now open for business
09/29 GLOBE TELECOM : extends free Wi-Fi service to 500 locations
09/29 STARBUCKS : Switch disposable coffee cups for reusables, urge campaign groups
09/29 STARBUCKS : Opens in Englewood, Chicago; Expands Support of Development in Diver..
09/29 STARBUCKS : The NAPCP Is Now Accepting Contracts for Its 2017 Commercial Card an..
09/29 STARBUCKS : to open shop with a training focus in East Baltimore
09/28 FRIEND : Starbucks shooting victim became US citizen in 2004
09/28 STARBUCKS : to open White Center store, provide youth job training
09/28 STARBUCKS : Wake up, restaurateurs - Thursday is Coffee Day
More news
Sector news : Restaurants & Bars - NEC
09/29DJU.S. HOT STOCKS : Hot Stocks to Watch
09/29DJMCDONALD : Raises Quarterly Dividend 6%
09/29DJMCDONALD : Raises Quarterly Dividend 6%
09/26DJYUM BRANDS : Board Approves Spinoff Plan, Raises Dividend 11%
09/26DJYUM BRANDS : Board Approves Spinoff Plan, Raises Dividend 11%
More sector news : Restaurants & Bars - NEC
News from SeekingAlpha
09/29 What Does Starbucks' Future Return Look Like?
09/29 National Coffee Day arrives as prices march higher
09/28 Starbucks To Serve Up A Nice Dividend Hike
09/28 THE PINK PORTFOLIO : Adding Starbucks, For Coffee And Toffee
09/28 Starbucks expands urban economic development initiative
Advertisement
Financials ($)
Sales 2016 21 294 M
EBIT 2016 4 187 M
Net income 2016 2 817 M
Debt 2016 1 133 M
Yield 2016 1,50%
P/E ratio 2016 28,52
P/E ratio 2017 24,96
EV / Sales 2016 3,77x
EV / Sales 2017 3,48x
Capitalization 79 167 M
More Financials
Chart STARBUCKS CORPORATION
Duration : Period :
Starbucks Corporation Technical Analysis Chart | SBUX | US8552441094 | 4-Traders
Full-screen chart
Technical analysis trends STARBUCKS CORPORA...
Short TermMid-TermLong Term
TrendsBearishBearishBearish
Technical analysis
Income Statement Evolution
More Financials
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 31
Average target price 66,3 $
Spread / Average Target 23%
Consensus details
EPS Revisions
More Estimates Revisions
Managers
NameTitle
Howard S. Schultz Chairman & Chief Executive Officer
Kevin R. Johnson President, Chief Operating Officer & Director
Scott Harlan Maw CFO, EVP & Principal Accounting Officer
Gerri Martin-Flickinger Chief Technology Officer & Executive VP
Craig E. Weatherup Lead Independent Director
More about the company
Sector and Competitors
1st jan.Capitalization (M$)
STARBUCKS CORPORATION-10.08%79 167
COMPASS GROUP PLC25.79%31 928
SODEXO15.93%18 158
RESTAURANT BRANDS INTE..16.44%10 474
WHITBREAD PLC-11.52%9 286
DARDEN RESTAURANTS, IN..-3.93%7 589
More Results