Coffee companies that have raised prices to match rising commodity costs over the past few years are set to profit as beans get cheaper thanks to a 28-month low. But more than supply and demand, a look at the international expansions of three major coffee companies offers insight into what works and what doesn't in the global market.
A latte is a latte is a latte?
Even in the midst of the economic crisis, and with a national coffee that's rather renowned, Athens has seen its Starbucks
For its most recent quarter, Starbucks reported an increase of total net revenues of 15% to $3.2 billion. Traffic has increased 6%, for an overall same-store sales increase of 7%. EPS also increased 18%, for a $0.06 increase per share compared to the same quarter last year. And the company continues to expand, with 176 net new stores globally, its 3,000th store in the Asia-Pacific, and its first store in Norway.
The Starbucks moat is huge, and internationally it seems to coexist peacefully alongside smaller, independently owned shops. After all, if you want a Greek coffee, you'll go to a mom-and-pop place. If you want a Skinny Frappuccino, Starbucks is your place.
And Starbucks regulars will appreciate that the language of ordering is universal. Walk into a shop in Istanbul, Bali, or Athens, and a grande is a still a grande. Travelers going into caffeine withdrawal after a long flight who don't have to look up the word for coffee in Turkish could keep Starbucks in business on gratitude alone, proving a latte by any other name isn't nearly as sweet.
The Middle East is not Canada
Poor Tim Hortons
Another red flag for potential investors is the company's unstable leadership. CEO Paul House returned to the Canadian company after former CEO Don Schroeder left last June with little notice, and says he'll stay on until a replacement is found. Downplaying the expansion, House says Hortons isn't looking for a CEO with international experience. That's not good news for the company, which is testing non-North American waters in the Middle East, but still holds itself as a Canadian company first. Since breaking into the Middle East will be a little bit trickier than expansion into the United States, such an omission seems a glaring oversight.
Drip by drip
In the face of Starbucks' rapid growth and Tim Hortons' simultaneous embrace and dismissal of its Middle Eastern shops, Caribou Coffee's
Caribou's performance has been mixed, with strong revenue growth and zero debt mixed with a low profit margin and weak earnings. The six shops in Istanbul will face fierce competition from Starbucks, which already has a strong presence there. Luckily, the company won't have much to worry about from Tim Hortons.
Coffee is king
It's not just these three coffee stocks that have international ambitions, either. Both McDonald's
Molly McCluskey owns shares of Starbucks and spends way too much time in international coffee shops. Follow her travel and finance tweets on Twitter at @MollyEMcCluskey. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of 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