What Oprah Winfrey, Starbucks, and $100 Billion Have in Common

Starbucks (NASDAQ: SBUX  ) held its annual meeting last week. In what is starting to become an informal ask-me-anything session like that of the Berkshire Hathaway meetings, CEO Howard Schultz addressed a wide range of topics. He questioned the wisdom of raising Seattle's minimum wage to $15 per hour and defended gay marriage, among other politically tinged issues.

However, the two most interesting things about the annual meeting had nothing to do with politics or the CEO's opinions. They had to do with $100 billion and Oprah Winfrey.

Starbucks aims high
You can accuse Starbucks of a lot of things -- too-high prices, non-English menu names, ubiquitous locations -- but you cannot accuse it of setting the bar too low. Schultz took the annual meeting as an opportunity to reaffirm the company's commitment to double its market capitalization to $100 billion.

Schultz declared, "We're still in the early stages of the growth and development of Starbucks, we're delivering record profits and revenue, sharing our success with our partners, and heading toward and past a $100 billion market cap."

Although Schultz did not specify a time frame for the achievement, doubling Starbucks' market capitalization would be an impressive feat given what the company has already done. Over the last decade, Starbucks' stock price has increased to more than five times that of the S&P 500.

Source: Yahoo! Finance.

The performance has been buoyed by four straight years of 7% or greater comp growth -- an impressive performance for any retailer. The strong performance of its stores allowed Starbucks to return $1.2 billion to shareholders in dividends and share repurchases.

Despite its strong operating performance in recent years, Starbucks is still in position to achieve massive growth over the next few years. In February, Schultz handed day-to-day operating responsibilities to now-Chief Operating Officer Troy Alstead and assumed a leadership role on the mobile development team. The move highlights Starbucks' leading position in the mobile payments channel and its commitment to the technology.

Already, 14% of in-store purchases are made via mobile phone and 1 in 4 transactions are made by My Starbucks Rewards members. The rewards program encourages coffee drinkers to keep coming back to Starbucks by giving them discounts, free drinks, and other bonuses for buying Starbucks products. Mobile payments reinforce the loyalty card by eliminating the need to carry a separate card and enabling faster checkout.

As a result of Starbucks' concerted effort to expand the reach of its loyalty card, the rewards program now has more than 8 million members in North America. Moreover, more than $18 billion has been loaded onto Starbucks cards since the program began in 2001. That number will only grow as more customers make Starbucks a habit, helped by the convenience and reinforcement of mobile card payments. In this light, it is not hard to imagine Starbucks' market capitalization hitting $100 billion before the end of the decade.

Oprah chooses Starbucks
The other big news out of the annual meeting was made by Oprah Winfrey. The media mogul is partnering with Teavana -- one of Starbucks' tea brands -- to create Teavana Oprah Chai tea. At the meeting, Oprah said she was reluctant to partner with other brands, stating that the various cosmetics and clothing lines that had approached her did not feel "organic." However, Teavana does feel organic, so Oprah was excited to lend her star power to the brand.

The partnership with Oprah is just another step in Starbucks' path to dominating the tea industry. Schultz reemphasized the company's commitment to "do with tea what it has done with coffee." If Starbucks can even come close to building a tea business as profitable as its coffee business, Schultz will soon be adding a few hundred billion to his market capitalization target.

Takeaway
Nothing but good news came out of the Starbucks' annual meeting. Strong operating performance, ambitious growth targets, and a celebrity partnership all say full steam ahead for Starbucks.

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