The Basics of Starbucks

Worldwide Invest Better Day 9/25/2012

Today, Sept. 25, the Motley Fool is celebrating  Worldwide Invest Better Day. The idea is to "educate, inspire, and motivate" investors of all experience levels to, well, invest better. With that in mind, let's take a look at the basics of Starbucks  (Nasdaq: SBUX  ) , the ubiquitous coffee shop.

The company's basics
Having been to a Starbucks literally in the middle of the Forbidden City in China, I have to assume that if you aren't at least familiar with the company, you probably do not live on this planet. According to the latest quarterly earnings report, there are 17,651 Starbucks locations worldwide, with the majority in the United States.

While the company plans on continuing to open hundreds of stores in America, even after closing hundreds a few years ago, China has been a major focus. The Forbidden City store has closed since I was there, but the total number of Chinese Starbucks locations has risen from 38 in 2006 to 278 at last count, with many more planned.

Store locations aren't Starbucks's only foothold in Asia, however. The company released its VIA instant coffee brand a couple of years ago, which it believes will eventually become a $1 billion product, adding to the $13 billion in sales that Starbucks already has. The instant-coffee market is about $4 billion worldwide, and the product is particularly popular in many Asian countries, including China and India.

Starbucks also recently purchased Evolution Fresh, a healthy-juice blending company. The purchase included manufacturing operations and a few stores that hope to one day be a fierce rival to Jamba Juice (Nasdaq: JMBA  ) . The stores are still in their infancy, with only a couple in Seattle and another planned for San Francisco.

The main threats
While many point to Jamba, Peet's (Nasdaq: PEET  ) , and McDonald's (NYSE: MCD  ) as competitors, the fact is that Jamba is only tangentially a competitor, Peet's is too small to be a threat, and McDonald's targets a different sort of customer. Starbucks markets itself as a "third place," a place as comfortable as home and as productive as work, where you can meet friends and enjoy the community. People don't generally think of McDonald's as a home away from home.

Overexpansion may be Starbucks' greatest threat, however, and it has been before. But the company has been growing its consumer products division to take emphasis away from store ubiquity, and same-store sales have been rising for eight consecutive quarters, so the company is doing something right. Still, with 20% more stores planned for 2013, this is something to watch out for.

Now that you know the basics of Starbucks, stay tuned to The Fool and check out all of our special coverage today during Worldwide Invest Better Day!

Fool contributor Jacob Roche holds no position in any of the stocks mentioned. Check out his Motley Fool CAPS profile or follow his articles using Twitter or RSS. The Motley Fool owns shares of Starbucks and McDonald's. Motley Fool newsletter services have recommended buying shares of McDonald's and Starbucks. Motley Fool newsletter services have recommended writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On September 27, 2012, at 11:10 PM, mkrusi wrote:

    Jamba is a horrible company to work with. Being a licensee they are arrogant and don't know how to treat their employees. What a shame for a great brand!!!

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