Starbucks' Global Expansion Is Gaining Steam

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Starbucks (NASDAQ: SBUX  ) is the largest coffee chain in the world, with 19,767 locations in more than 50 countries. Even with this huge number of locations, there is still plenty of room for further expansion, and that is exactly what the company is doing. Let's take a look at Starbucks' plans to bring its specialty drinks and products to more markets around the world.

The Americas
In the Americas, Starbucks currently operates 13,493 locations; 8,078 of these locations are company-owned and 5,415 are franchises. In the fourth quarter of fiscal 2013, 340 total stores were opened, with 164 being company-owned and 176 being franchises.

Starbucks plans to add about 600 locations in the Americas in fiscal 2014. This would bring the total in this region to over 14,000, continuing its reign as the company's largest market. In fiscal 2013, the Americas brought in over $11 billion in revenue, which was a 10.7% increase from 2012. Total revenue for Starbucks was $14.9 billion, meaning the Americas provided about 73.8% of revenue. It seems this will forever be the largest coffee market for Starbucks and I feel it will not stop until every large city or town has a location of its own.

China and Asia-Pacific
The China and Asia-Pacific region is home to 3,882 Starbucks locations. The company owns just 906 of these stores and the remaining 2,976 are franchised. Simple mathematics shows that the majority of the stores are franchised. However, it seems Starbucks has been entrusting itself with more of its own operated locations as of late; I say this because, in the fourth quarter, 79 of the 197 locations that opened their doors were company-owned.

The key note of the fourth quarter, regarding this region, was the milestone of reaching 1,000 locations in both China and Japan. This is only the start of the region becoming more saturated with stores, as Starbucks plans to add approximately 750 locations in fiscal 2014; this is the largest number of stores that the company plans to add in any region for the year.

This region showed explosive growth in fiscal 2013 with revenue rising 29.1% to $255.7 million, driven by a strong 9% increase in comparable-store sales. I believe the China and Asia-Pacific region could one day have over 13,000 locations like the Americas has today. It will take a decade or longer to get to this point, but there are too many markets in this region with high and dense populations for Starbucks to pass up. 

Europe, Middle East, & Africa
Starbucks has 1,969 locations in Europe, the Middle East, and Africa, with 853 being company-owned and 1,116 being franchises. In the fourth quarter, six company-owned locations were closed down and 34 franchises were added, resulting in a net opening of 28 locations. 

In fiscal 2014, Starbucks plans to add about 150 locations to this region. This 150 planned locations is the lowest total of the three major markets, but I believe this is because the region did not show much growth in fiscal 2013; revenue rose just 1.6% to $1.16 billion year-over-year, as comparable-store sales grew 0%. In 2014, Starbucks believes comparable-store sales will grow 2%, but it will be cautious when expanding; perhaps it will only add locations in densely populated areas or "luxury" markets. With this said, I believe Europe's economy will gain steam in 2014, so fiscal 2015 could have much more expansion in store for the region.

Elsewhere around the world
In all other markets around the world, Starbucks operates 423 locations; 357 are company-owned and 66 are franchises. In the latest quarter, seven company-owned locations were opened, but 14 franchises closed down. The regions deemed "other" are not the focus of Starbucks right now, but a few locations will be opened each quarter in 2014. The Americas, China and the Asia-Pacific, and the Europe, Middle East, and Africa regions are much too valuable to somewhat "waste" time and money elsewhere.

The Foolish bottom line
Starbucks is an expansion machine and this has been a catalyst in driving both earnings and revenue to all-time highs. The company's projection for fiscal 2014 calls for another record year and the addition of approximately 1,500 new locations. Starbucks is a "best of breed" company that should be bought on any weakness provided by the market.

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5/27/2016 4:00 PM
SBUX $55.15 Down -0.14 -0.25%
Starbucks CAPS Rating: ****