Starbucks Global Sales

American Coffee Around the World

Aug 29, 2006 Daniel Workman

Striving to become THE global coffee brand, Starbucks has tripled its revenues over the past 5 years to some US$8-billion in 2006.

With just 20% of the world's coffee consumed in North America, Starbucks aggressively sells its offerings in countries that already have dedicated coffee or tea drinkers.

International revenues jumped over 30% in 2006. While domestic growth also has been robust, revenues from U.S. operations have risen more slowly at 20%. Some 20% of total company revenues now originate outside America, up sharply from only 9% in 1997.

Growth has been paced by new store openings around the world. In 2001 the company had 3,200 retail locations in America and about 400 outlets in 17 other nations. Today Starbucks has about 12,000 stores, almost 4,000 of which are in 36 countries outside the U.S.

Similar to other retailing giants like McDonalds and Wal-Mart, Starbucks has experienced growing pains in bringing American-style coffee sales to international marketplaces particularly in volatile political or economic situations. Anti-war protesters in Lebanon have boycotted Starbucks well before the current Mideast crisis. Faced with possible terrorist attacks, the company had to close its retail stores in Israel.

Up to 2004, Starbucks' international operations ran losses particularly in Japan, the largest market for the company outside the U.S. Since then the international group continues to improve its profitablity numbers quarterly.

Starbucks also has had to deal with an initial lack of acceptance from France's historic cafe culture, with older consumers frowning on a big U.S. coffee house chain with standardized disposable cups. Yet younger coffee drinkers in France have joined American tourists in Paris to embrace such favourites as Starbucks caramel coffee.

The company is aggressively expanding in China where Chinese traditionally prefer tea. Key to success in the People's Republic are coffee houses that empower China's emerging middle class to publicly display their new lifestyles and status while keeping Starbucks beverages as affordable luxuries.

Starbucks and its local joint venture partners will open retail outlets in India during 2007. Critics question whether middle-class Indians will support American-style coffee houses, pointing to the cultural resistance that forced Wal-Mart to close its stores in Germany,.

And The Winner Is...

Starbucks has had to face issues in developing its international business portfolio; all companies do. Starbucks has a successful track record much like baseball slugger Ty Cobb who rules as the player with a .366 career batting average, the highest ever. And yet for almost two-thirds of his at-bats Cobb didn't get a hit. The same idea applies to Starbucks which shows an excellent overall success rate selling its products in international markets.

What's appealing about Starbucks is the fact that the company focuses on profitable growth.

For example, Starbucks plans to aggressively cluster new stores in prime locations in the world's fastest growing economies, specifically the nations that investment analysts refer to as BRIC (Brazil, Russia, India and China).

Notably, Starbucks introduces its full range of products in phases, selling coffee and other beverages including tea and juices through retail stores in 25 international countries. In addition to retail beverage sales, stores in 11 other countries including the United Kingdom, Thailand, Canada and Chile also sell whole bean coffees, coffee-brewing equipment and merchandise.

The coffee titan also selectively introduces specific products like its ready-to-drink coffee beverages to specific countries like Japan, Taiwan and Korea to maximize profits. Starbucks has also made some progress in making its products more friendly to the environment.

As an investment, perhaps the question to savour while enjoying your next frappucino is when - not if - Starbucks' stock price will ascend from its current price of $30 to $39 which would be more consistent with the stock's historical price-to-earnings ratio. Starbucks' stock trades under the symbol SBUX on Nasdaq.

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The copyright of the article Starbucks Global Sales in International Trade is owned by Daniel Workman. Permission to republish Starbucks Global Sales in print or online must be granted by the author in writing.

Japanese Starbucks