Cost Of Production Of Starbucks Essay

GMCR’s warns of the potential impact of the price of coffee on the gross profit margin. To combat this, GMCR had made a number of purchase commitments to ensure an adequate supply of coffee (GMCR Annual Report, 2010). The market price for coffee is impacted by numerous factors including weather, economy, and competition. It is vital that GMCR continue to take proactive measures to secure against unforeseen spikes in coffee prices. The price of coffee does not only impact GMCR’s ability produce coffee for the Keurig brewer under its namesake but impacts their partner suppliers as well. GMCR purchases coffee from brokers, farms, estates, and cooperative groups and essentially diversifies its coffee supply, reducing some supply risk (GMCR Annual Report, 2010).

2. Starbucks enjoyed strong financial performance in 2011. The company did not explicitly attribute this, but with an 8% rise in same store sales it seems that either the consumer market bounced back, or Starbucks made changes that attracted more consumers. The company feels that it offered better products and a better experience at its stores. The company also credited operating efficiencies and tight control of spending for improved profits. In addition, the company continued its global expansion, which improved the top line, and used the economies of scale it generated as part of its cost control program.

Although the price of Starbucks’ coffee is always a big trouble for students undergraduate, they are using healthier ingredients. By calculating for the prices of organic milk and best seller coffee beans, it is very clear that their price is much cheaper than even the ingredients, which is impossible as there was also money for electricity, money for renting the shop, and so on. So it is clear that they don’t use very slap-up ingredients. By contrast extra charge in Starbucks could be seen as they uses better ingredients, as I always seen them using organic milk pouring into coffee, and also their website clearly says that they use organic milk and those coffee beans they sell in shops, which are known as fresh and healthy coffee

Starbucks is the world’s largest specialty coffee retailer, Starbucks has more than 16,000 retail outlets in more than 35 countries. Starbucks owns more than 8,500 of its outlets, while licensees and franchisees operate more than 6,500 units worldwide, primarily in shopping centers and airports. The outlets offer coffee drinks and food items such as pastries and confections, as well as roasted beans, coffee accessories, teas and a line of compact discs. The company also owns the Seattle's Best Coffee and

Starbucks financial statements were analyzed for the fiscal year ended September 27, 2015. Like all public companies, annual and quarterly financial statements are required to allow regulators and other interested parties to analyze the financial status and management decision making of the company. This analysis focuses on the results of Starbucks most recent published annual report containing their balance sheets, statement of earnings and cash flows. These statements will be analyzed against the results of one of its competitors, Dunkin Donuts, to investigate how the two companies compare to each other. It was noted that Starbucks and Dunkin Donuts do not have corresponding fiscal year ends. The data therefore is not directly comparable since the reports do not reflect the same time period of data but should provide additional insight. The paper will attempt to provide a brief analysis of Starbucks operations in terms of its liquidity, leverage, activity, profitability and growth ratios used by analysts in the industry.

Assuming that the demand and supply for premium coffees are in equilibrium, the price will be at a constant, without significant pressure from the market. If Starbucks introduced the world to premium blends, this would cause a positive shift in the demand curve. There a higher equilibrium price and higher quantity when demand increases and supply remain unchanged. As prices increase, and the market moves to a new equilibrium, we will see higher wages, more advances and investments in technology and infrastructure, and greater competition. As production become more efficient and competition becomes greater, supply will increase and cause prices to settle back down. There are several factors that will impact the long-term equilibrium, such as changes in supply. For example, if a hard freeze eliminated Brazil’s premium coffee crop, this would cause a negative shift in the supply curve. Assuming demand remains constant a negative shift in the supply curve will cause quantity to decrease and equilibrium price to increase. Research shows that in 2011 a frost occurred in Brazil's southeastern coffee growing belt. Traders worried that next year's yields could be hurt. At the same time, heavy rains during harvest forced Columbia to reduce its crop estimate for 2011. Understanding the impact of problems along the supply chain and how the changes in supply

Starbucks is known for their Frappuccino’s; unfortunately they are on a downward spiral in sales due to competitors such as McDonalds. In 2008 Starbucks admits to its losses due to their competitors. “Company executives now freely admit that such thinking is largely to blame for the woes that led to Tuesday’s announcement that Starbucks will close 600 U.S. stores and eliminate thousands of jobs. The coffee giant’s missteps have come at a spectacularly bad time, hitting as the economic slump deepens and consumers are seeing their discretionary spending eaten up by rising gas prices and grocery bills (Linn).”

Starbucks’ Total fixed assets increased from $3,200.5 billion in 2013 to $3,519 billion in 2014. This was a 9.95% increase. As a percentage of total assets on the balance sheet, fixed assets increased from 27.79% to 32.73% (Starbucks,

Since the operating income boost from 562 in 2009 to 1728.5 in 2011 and the sales just increases from 9774.6 to 11700.4, the net profit margin of Starbucks increases from 4% in 2009 to 10.65% in 2011. The differences mean that by considering the costs and expenses, Starbucks become more profitable in 2011. It generates 10.65 cents in net income for every dollar in sales in 2011.

In this report, the performance of Starbucks over the past few years has been analyzed. The financial statements have been obtained from the years of 2003 up to 2007, and have been analyzed using the horizontal analysis, vertical analysis, and the ratio analysis (depending on what exactly is being analyzed).

Starbucks generates strong cash flows has solid liquidity. The company executes rigorous cost cutting initiatives to improve its bottom-line. However, throughout fiscal 2008, Starbucks continued to experience declining revenue, particularly in US operation. The decline is largely attributed to lower customer traffic.

Starbucks’ shares have grown more than 1500% over the past decade. Financially, it has been an oak tree in an ever changing economy with customers that have ever changing demands. However, there has been increased concern for the financial viability of the coffee shop a recently announced plan to close down over 600 stores that were said to be underperforming domestically. That means that more than 1,000 jobs will be eliminated. As scary as that is on the local front to top management, the executive staff feels that it is the only way to recover from it’s shocking $108.7M loss for the 2nd quarter this fiscal year.

Nothing like the fresh scent of brewed coffee in the morning – “Starbucks” a well-known coffee house that is still growing and expanding their operations today is considered the number one specialty coffee retailer around the world and abroad. Therefore, the supply and demand for coffee is on the incline and is regarded as one of the most rapid growing organizations in the world. According to the National Coffee Association, adults between the ages of 18 and 39 are more likely to purchase coffee out-of-home, then older consumers (2016). Even coffee statistics conducted in 2016 indicates “50% of the population, equivalent to 150 million Americans, drink espresso, cappuccino, latte, iced/cold coffee” (E-Imports, 2016). Other statistics numbers show that an estimated of total Americans consuming coffee would be up by 1.5% and specialty coffee up from 20% in this year alone. Even the global consumption will increase by 12% over the next years. Therefore, a key question is how will the “law of demand” predict how the consumers will behave (Lorenzetti, 2016)? Namely, will the higher demand for coffee beans impact what the consumer at Starbucks will pay for a cup of coffee? Therefore, companies such as Starbucks should analyze and understand the microeconomic model to get a clear picture of the price elasticity, cost to produce, and the overall market to make the most effective business decisions and recommendations that will have an

Raw Materials (Coffee Beans): Coffee bean farming is not vertically integrated into Starbucks; the company purchases coffee beans from farmers. Starbucks choose to outsource farming due to the low potential hold-up problem. For its coffee, Starbucks uses only high-quality Arabica beans, instead of regular commodity and lower quality robusta beans. Since there are a lot of market participants trading Arabica beans (i.e. farmers & Arabica beans buyers), there is an established market price. Moreover, farm land has a low degree of asset specificity, and therefore farmers’ investments do not depend only on Starbucks as

As more customers attach food items to their beverage orders, Starbucks increases total sales per store, which means the fixed costs account for a smaller percentage of sales, driving down cost of sales as a percentage of revenue. As the company leverages more fixed costs and attaches more food items to beverage sales, the overall profit margin should continue to improve for GAAP and non-GAAP. There are more initiatives as well as just the two mentioned, which are having a huge impact on the bottom line; so why isn’t Starbucks stock doing better?