The world's largest coffee purveyor, Starbucks
Early this month, Starbucks launched the VIA ready brew in its Chinese stores. VIA's success in China will give Starbucks the impetus to go ahead and increase distribution across the globe, and that is exactly what it is planning to do. It has also announced its intentions to continue international expansion, earmarking Brazil as a focus this year. Investors should take note.
Starbucks is in the middle of a transition at the moment. It recently ended its licensing agreements with Kraft Foods
Furthermore, the initial success of VIA comes as a positive sign that it's gaining traction. So Starbucks can continue to expand and innovate with a certain level of confidence.
Starbucks in China
Starbucks currently has locations in 35 cities in China, and CEO Howard Schultz said the company plans to double this number soon, according to a Bloomberg report. And yet with even this relatively tiny share of the Chinese market, Starbucks is at the forefront of the domestic market, having a staggering market share of 73.5% (in 2009), according to Euromonitor International.
The success of VIA in those Chinese stores exceeded expectations, and the company plans to introduce more instant beverage and food products in the next year and a half. If you combine this early traction with the fact that Starbucks is planning to open nearly 1,500 stores in China in the next four years -- more than tripling the number of stores there -- you can see the strong semblance of a bull case for this stock. Estimates project Chinese consumption of Arabica at 15% per year, making it a major player in the years to come, at least when it comes to coffee.
Closer to home
The company is also planning to expand its coffee line back in the U.S., where it sees a potential $377 million market for flavored coffee. You can just add that to your growing bull thesis.
Along with expanding its instant coffee business, Starbucks has also started a mobile payment plan in about 6,800 Starbucks stores and close to 1,000 Starbucks' at Target
The Foolish bottom line
Starbucks looks all set to expand its business lines and boost its share in the emerging Chinese market. And not to mention Brazil, which is the second largest coffee-consuming country in the world. These proposed expansion plans bode well for the company's future, and it looks set to regain lost ground after a few disappointing performances. Things look good ahead for the Seattle-based coffee maker.