• Lallic Partners

Is Starbucks a Buy?

Eugene Guo | April 15th 2020 | Editor: Nichola Monroe


Seattle-Based Coffeehouse Starbucks Coffee has evolved into a global brand since its rise in the 1990’s. So far, Starbucks Coffee has experienced an unshaken market dominance, and it makes sense for the company to continue its growth despite the short term coronavirus stock market correction causing it to lose $74 billion in valuation.


Market Dominance and Competition:

Starbucks Coffee has had its revenue and profits increase since fiscal year 2019, reaching new highs every time. As of April of 2019, Starbucks already has 39.8% International market share in the coffee industry. It is clearly the industry leader in the coffee business having a unique competitive advantage of promising quality and experience through its brand recognition. Starbucks has over 30,000 stores worldwide compared to its closest competitors


McDonald's and Costa coffee having 15,000 and 3,800 stores respectively. These numbers all help prove Starbucks as a clear industry leader and a company worth investing in. Moreover, it has made leaps in redefining the concept of a coffee shop with the opening of 6 unique Starbucks Reserve Roasteries separately in Shanghai, Milan, Chicago, Seattle, New York and Tokyo. Starbucks has also made great efforts in creating their popular cold drinks selection, such as iced teas, lemonades, and cold-brews It is a growing segment of their business, making up to 50% of sales today. Starbucks has established dominance in


the coffee market and looking at the increase in its revenue and profits from the earning reports, this international brand is only going to continue to grow in the future.


Investing Opportunity:

Under the current influence of the coronavirus, Starbucks is definitely going to be impacted on the short term due to the damage done on its major Asia and US market as a result of this virus. This however, is unlikely to be able to affect the steady long term growth of the company. The market correction done by the virus gives investors a great opportunity to invest in the company at a lowered price.



Summary:

Based on the continuous quarterly growth of Starbucks in terms of both sales, profit,its clear market dominance, and future potential, Starbucks seems to be a promising long term investment opportunity. Though the current economic environment in both Asia and the US is certainly going to have a short term negative effect on the company’s stock and performance, it almost certainly will only be a temporary dip in the company’s value which won’t stop the


long term growth of the company.




Written For Lallic Partners

Image Citations:

https://business.financialpost.com/news/retail-marketing/starbucks-to-push-customers-to-ditch-dairy-for-alternative-milk-as-it-moves-to-cut-carbon-footprint

https://www.starbucks.com



Citations:

https://gcrmag.com/market-reports/view/starbucks-vs-mcdonalds


https://www.cnbc.com/2020/01/28/starbucks-sbux-earnings-q1-2020.html


https://www.investors.com/research/stock-market-update-tom-pettys-wont-back-down-ftd/


https://www.investopedia.com/articles/markets/101415/top-6-companies-owned-starbucks.asp


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