1. Starbucks
Michael Fensterstock
Lena Feygin
Edward ’Tj’ Gerety
Robert Matthews

2. Overview
- Starbucks Corporation (SBUX) –- Starbucks Corporation (SBUX) –
international coffeehouse –international coffeehouse –
“Starbucks Experience”“Starbucks Experience”
-High-quality Coffee and “thirdHigh-quality Coffee and “third
place” between work and homeplace” between work and home
-Revenue driversRevenue drivers
- Company-operated retail storesCompany-operated retail stores
- Specialty OperationsSpecialty Operations

3. Overview
- 13,490 retail stores in13,490 retail stores in
North AmericaNorth America
- 5,727 stores internationally5,727 stores internationally

4. Third Place
Experience
- Ideal for informal meeting and aIdeal for informal meeting and a
quiet moment away from the hubbubquiet moment away from the hubbub
of daily life.of daily life.
- Wi-Fi internet access in allWi-Fi internet access in all
stores makes it a place wherestores makes it a place where
customers can work.customers can work.
- Book and music eventsBook and music events
- ““Community center”Community center”

5. SWOT

6. SWOT - Strength
Strengths
• Most recognizable brand in the specialty coffee
market
• SBUX experience is unique
• Howard Shultz is the barista to the world
• Loyal customer base
• Desirable store locations on the most desirable
corners of the planet
• Earnings/Revenue/Profit growth
• Affluent middle-class customers
• Low advertising costs (< 1% of revenues)

7. SWOT - Weaknesses
Weaknesses
• Sparse International presence (US centric)
• Relatively low switching costs (customers can
easily switch where they buy their coffee)
• Competitor growth in non-US markets
• Perceived high priced items
• Over expansion can lead to cannibalization and
weakened SBUX image
• Health implications of coffee consumption still up
for debate

8. SWOT - Opportunities
Opportunities
• Emerging market strategy (Brazil, China, India)
• Expanding into higher margin food sales
(represents 22% of all sales)
• New product offerings including energy drinks,
CD’s, health drinks and organic drinks
• Expansion into the home brewing market

9. SWOT - Threats
Threats
• Increasing competition (Dunkin Donuts,
McDonalds, Panera)
• Increasing costs (higher coffee beans, labor, new
store openings): exposure to commodity price
fluctuation
• Smaller private-owned local coffee houses
• Coffee supply, distribution channel

10. Porter 5 Forces

11. Porter 5 Forces
Rivalry Among ExistingRivalry Among Existing
PlayersPlayers
•High threat among existing playersHigh threat among existing players
•The inputs are fairlyThe inputs are fairly
undifferentiatedundifferentiated

12. Porter 5 Forces
Threat of SubstitutesThreat of Substitutes
• Very high threat from substitutesVery high threat from substitutes
• Many coffee drinkers considerMany coffee drinkers consider
tea, hot chocolate, and energytea, hot chocolate, and energy
drinks to be reasonable substitutesdrinks to be reasonable substitutes
for coffee.for coffee.
• Additionally, customers canAdditionally, customers can
choose to brew their own coffeechoose to brew their own coffee
rather than buy it from a shop.rather than buy it from a shop.

13. Porter 5 Forces
Bargaining Power of SuppliersBargaining Power of Suppliers
• Very low threat from SuppliersVery low threat from Suppliers
• Inputs for the industry areInputs for the industry are
standard as opposed tostandard as opposed to
differentiateddifferentiated
• SBUX can switch easily betweenSBUX can switch easily between
non-bean suppliers and suppliersnon-bean suppliers and suppliers
not locked into specific firmsnot locked into specific firms

14. Porter 5 Forces
Bargaining Power of BuyersBargaining Power of Buyers
• There is a relatively low level ofThere is a relatively low level of
threat from the bargaining power ofthreat from the bargaining power of
buyers. There are a large number ofbuyers. There are a large number of
buyers with relatively smallbuyers with relatively small
purchases.purchases.
• Customers do not face anyCustomers do not face any
significant switching costs whensignificant switching costs when
moving between coffee shopsmoving between coffee shops

15. Porter 5 Forces
Threat of New EntrantsThreat of New Entrants
• Relatively low threat of newRelatively low threat of new
entrants because SBUX has a costentrants because SBUX has a cost
and performance advantage.and performance advantage.
• SBUX is well-established and hasSBUX is well-established and has
already learned how to continuallyalready learned how to continually
lower costs and improvelower costs and improve
performance.performance.

16. Competitors
SBUX DNKN MCD
Market Cap: 57.37B 4.80B 97.89B
Revenue 14.46B 677.77M 27.79B

17. Competitors - 2012

18. Competitors - 2012

19. Comparable Store
SalesYear to Date Financial Results
Three Quarters Ended Jun 30, 2013
Comparable
Store Sales(1)
Sales Growth
Change in
Transactions
Change in
Ticket
Consolidated
7 %
5 % 1 %
Americas
7 %
5 % 2 %
United States
8 %
6 % 2 %
EMEA
(1 )%
2 % (2 )%
CAP
9 %
7 % 2 %
(1)
Includes only Starbucks company-operated stores open 13 months or longer.

20. Risk
Saturated marketSaturated market
• Started with 17 coffee shops, currentlyStarted with 17 coffee shops, currently
19,209 in 44 countries. In Seattle there19,209 in 44 countries. In Seattle there
is one shop per 9,400 pplis one shop per 9,400 ppl
Rushed into Markets – Cost capitalRushed into Markets – Cost capital
• Forced to shutdown stores in WesternForced to shutdown stores in Western
Europe due to high rents and slow retailEurope due to high rents and slow retail
outlet growthoutlet growth
International Markets made up 21% of company’sInternational Markets made up 21% of company’s
revenue.revenue.

21. Risks
Emerging Markets are unstable.
• Retail growth unpredictable in these areas
• Currency Markets remain unstable
• Access to their Supplies/Products supply
chain could be jeopardized by political
and/or monetary disruptions.

22. Risks
McDonalds and Dunkin’
Donuts
• Both are marketing
to Starbucks’
consumers
The Second Rise of the
Local Coffee Shops
• Up and coming
generations are
moving back to local
over corporate.

23. Analyst Estimates
Growth Est SBUX Industry Sector S&P 500
Next 5 Years
(per annum)
19.78% 11.88% 15.01% 9.52%
Price/Earnings
(avg. for
comparison
categories)
34.68 29.83 20.22 15.99
PEG Ratio (avg.
for comp
categories)
1.75 1.95 1.87 1.65
Earnings per
Share
Current Qtr
Sep 13
0.46
Next Qtr
Dec 13
0.57
Current Year
Sep 13
2.22
Next Year
Sep 14
2.66

24. SBUX performance

25. Key Financial
Metrics
Fiscal Year-End September
2012 Sales $13.30B
1-Year Sales Growth 13.67%
2012 Net Income 1.38B
1-Year Net Income Growth 11.09%
Total Assets $8.22B
Market Value $56.78B
Prescreen Score Low Risk

26. Earning Estimate

27. Debt/equity 9.5
Total debt 549.7M
- Debt/equity 9.5MDebt/equity 9.5M
- Total Debt 549.7MTotal Debt 549.7M
- Cap Ex 856M in 2012Cap Ex 856M in 2012

28. Growth Rates

29. Recommendation

30. QUESTIONS