Starbucks Analysis

The specialty coffee industry had seen steady growth for years and the trend was expected to continue until at least 2015. Of the various segments within the specialty coffee industry, most of the growth was attributable to beverage retailers “Coffee and kiosks”. In 1979 there were approximately 250 specialty coffee retailers. The number quadrupled by 1989 to approx 1000 outlets, and it exploded to roughly 15000 by 2002. Nationally, specialty coffee sales totaled over $ 10 billion in 2005.

In the US, specialty coffee is a $5-billion industry with a 20% growth rate (House, 2013)

Within the coffee industry Starbucks Corporations has grown from a small shop to a leading coffee distributor, proving to have financial strength and determination to continue growth. With the weakening economy the continued success of Starbucks

(3a): What trade-offs has Starbucks made? What different activity choices has it made from its rivals?

Founded in 1985, Starbucks is one of the largest coffeehouse companies in the world, with over 16,000 stores in 50 countries (Starbucks Annual Report, 2009, p. 1). Starbucks sells high-quality

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

As Starbucks' strategic vision evolved over the years, so did its strategy. Starbucks current strategy in comparison to its original competitive strategy are: to continue the focus on growth; to establish a leadership with company owned stores in key markets such as USA, Japan, Australia, and UK; to pre-emptively enter and aggressively grow in all targeted markets; to leverage the brand into new product categories and channels; to continue operations improvement; to growth through innovation; to develop and maintain leadership talent; and to maintain their values, culture, and guiding principles. The key elements of Starbucks current strategy is to expand Starbucks globally, and to further develop its internet business. The strategy has changed over time as the business has grown exceptionally well in North America, and now they want to take that success over sea.

By 2003, the number of retail specialty coffee shops, cafes, kiosks, coffee carts, and roasters in the United States reached over 17,000, equating to nearly $9 billion in sales. According to the Specialty Coffee Association of America, 16 percent of adults in the United States drink coffee from one of these specialty outlets daily. (“Organo Gold”, 2008).

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.

In this assignment, a savvy financial analyst researching companies in which to invest a U.S. publically-traded company that would be a good investment was chosen. After a lengthy search, a company that my family is unduly familiar with, Starbucks, was chosen and in the following pages a financial analysis will be described.

Starbucks’ lead in the specialty coffee industry exemplifies the result of deftly executing a well-planned business strategy. Moreover, Starbucks is well positioned for what is expected to be a continuing rise in the popularity of specialty coffee products. The question before Starbucks’ leadership, however, is what avenues will lead to Starbucks’ goal of remaining true to its core, the highest quality coffee products while providing a “total coffee experience” for its customers?

STARBUCKS AS AN INTERNATIONAL BUSINESS the single most important economy to invest in for the coffee business, if its economy continues to grow. India is another major source of economic growth. Starbucks plans to open its first

Starbucks strategy at the beginning was based upon creating a symbolic-expressive value trough a social meaning concept of offering the American community meeting places; this positioned its original products and made associations to identify consumers with self-expression providing personal, social and sociocultural meaning.

Starbucks first opened its doors in Seattle’s Pike Place Market with the name being coined from that of Moby Dick’s first mate (Schultz & Yang 1999). It has spread its shops across North America, all over Europe, the Middle East, Latin America as well as the Pacific Rim with an estimated 35 million customer weekly (Michelli, 2008). With tremendous growth from a small time coffee shop, the company has matured to an international icon that today it is one of the world’s leading retailer, roaster and brand specialty coffee (Story, 1971). The company offers whole bean coffees, espresso beverages, and confectionery and bakery items.

Coffee is an extremely popular beverage worldwide and has a market that is segmented into three categories: growers, roasters, and retailers. Aside from oil, coffee is the most popular item in the world. South America has been ranked as the #1 coffee producing region in the world. The top producer in that region is Brazil. 50% of people aged 18-24 in the U.S. would consider themselves to be coffee drinkers. Out of all American coffee drinkers the amount consumed is 1.96 cups of coffee per day, and 87% of these people typically drink their cup of coffee at home. Retail sales of coffee has amounted to $5.17 billion in the United States. 58% of people reported that they typically drink coffee because they need to wake up. “Coffee-related economic activity comprises approximately 1.6% of the total U.S. gross domestic product” and the coffee industry alone provides jobs for over 1.5 million people.