Autumn is just around the corner, and one reason millions of coffee drinkers get excited about this time of year is Starbucks' (NASDAQ:SBUX) Pumpkin Spice Latte.
There are legions of fans of this autumn concoction. In fact, the Pumpkin Spice Latte -- let's call it the PSL for short -- is Starbucks' top-selling seasonal beverage of all time. But there's another reason to be cheery over this festive drink, other than enjoying the flavor: This kind of consumer craze boosts Starbucks' bottom line, which means it benefits shareholders as well. So while you're enjoying a PSL starting this month, you might want to consider how Starbucks' position as the industry leader in coffee brand loyalty will help your portfolio as well.
Brewing up a consumer craze
Starbucks has created an amazing brand image in what can often be a very undifferentiated industry. It's served itself well by by engaging customers in a way that makes them loyal -- something that many of its peers lack.
Customers have purchased more than 200 million PSLs since Starbucks introduced the drink in autumn 2003. While the flavorful combination of cinnamon, nutmeg, and pumpkin is what first drew people's attention, it's not just the taste that has helped the drink reach superstar status in the coffee world. Starbucks' crafty marketing and customer engagement have been a huge factor.
For instance, this season the company has launched a dedicated Twitter profile for the drink: @theRealPSL. Featuring games, promotions, and other types of engagement, the Twitter feed had more than 92,000 followers as of Thursday morning. Starbucks says during autumn there are an average of more than 3,000 tweets per day with the #PSL hashtag.
Among the interactive features this year has been a game in which winners were able to get a PSL early if they solved a "secret word" puzzle. The game started in mid-August. Daily clues were posted for five days, and customers who correctly guessed the secret word could get a PSL before it was added to the seasonal menu. The first customer to guess correctly at a location, thereby "unlocking the PSL," got his or her picture on a sign at the store.
Similarly in recent years, customers could get a secret code to claim a PSL a week early. In another game, cities were pitted against each other for which one could get its PSLs ahead of time.
The PSL fervor increases each year. The following graph shows keyword search results for " Starbucks Pumpkin Spice Latte" year by year.
That's the power of savvy marketing and consumer engagement, and it's what has put Starbucks at the top of an industry in which it's difficult to stand out.
Can Starbucks caffeinate your portfolio, too?
Starbucks has put its iconic brand strength and strong pricing power to work to create legions of loyal fans. The company has been very profitable over the past five years, and guidance going forward looks strong.
For fiscal 2013, Starbucks reported another year of rising net revenue, up to nearly $15 billion, a $1.6 billion increase from the year prior. That trend continued in the most recently reported quarter, with net revenue up 11% year over year to a quarterly record of $4.2 billion. The company is well on track to report another year of great revenue growth with its 2014 year-end results.
Starbucks also continues to position itself with more sales at its existing stores and more stores in total. Quarterly comparable-store sales increased 6% globally year over year in the most recent quarter, marking the 18th consecutive quarter of 5% or more year-over-year comps growth. The company also opened 344 net new stores during the quarter, ending the quarter with 20,863 locations across 64 countries.
With the huge gains in the stock price over the last few years, investors are right to ask if the company is too expensive now? At a P/E of over 30, it's not cheap. But it has consistently proved its ability to remain profitable and keep growing following the 2008 economic downturn.
Looking forward, the company has increased its guidance, with expected 2015 revenue of growth over 10% and a forecast for 1,600 new stores in FY 2015. The company expects as much as 20% earnings growth over 2014 -- the kind of growth that's just as exciting as that first Pumpkin Spice Latte of the season.
For long-term-oriented investors, the unveiling of the Pumpkin Spice Latte isn't just a bet on the season, but an example of continued savvy operations from a well-run company that knows how to capitalize on its tremendous brand strength and customer loyalty.
Bradley Seth McNew has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.