Sunday, 29 April 2012

Starbucks Ready for Huge Growth



Oh Starbucks. There's always those people who make fun of Starbucks lovers saying, "I'd never pay 5 bucks for a cup of coffee!" and, "What does a 'tall' even mean?" But despite these critics of one of the largest coffee brand in the world, there exists millions of people willing to dish out those 5 dollars because it is the little things in life that one truly appreciates. Starbucks has created its culture to do just that and please tired customers in the morning with sweet and energetic drinks.

Furthermore, many of the large corporations we hear about all the time, Apple and Starbucks being two of them, have begun realizing potential in Chinese markets. With recent expansion into China, Starbucks has been able to tap into a new market of millions of people. It plans on opening 400 new stores in the China/Asia Pacific region, which doesn't include what is already existing there. Even if, for example, 10% of China is willing to pay for a Starbucks cup, that's already over 100 million new people. Besides expansion into China, Starbucks also started diversifying to gain market power by selling juice, liquor, and its newest success the K-Cup.

Other signs of long term growth are apparent as well. Starbucks has given optimistic guidance towards its third quarter results, saying that its Tazo Tea will generate billions in revenue and the K-Cups will add close to 3 to 5 cents of earnings per share due to increased demand of them. It opened a total of 176 stores the past quarter for a grand total of 17420 stores worldwide. They reported income from China/Asia Pacific of only 69.5 million, but because of the new addition to stores, this number is likely to increase by several hundred million going into the next year. Also, the fact that they are able to pay dividends, which may be small, indicates that they are financially set for the near future.

And the last reason I believe Starbucks will grow is because now we can all buy Starbucks at Disney theme parks! It aims to open 6 new stores that will blend into Disney's themes and be noticeable to vacationers near the entrance of the park. Food prices at amusement parks are already overpriced, and since Starbucks is notorious for expensive coffee, we can only imagine how much a cup of joe will cost in Disney. Coupled with the price will be high demand from many tired parents from the previous day's adventures in Disney. If Starbucks becomes successful in Disney theme parks, it can then look to expand into other theme parks across the nation and even worldwide.


By Kunal Agrawal

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