Starbucks (SBUX), the world’s largest coffee-shop chain, truly is king of the coffee hill. While competitors such as
McDonald’s (MCD) and
Dunkin' Donuts (DNKN) are trying to pick away at the brand’s dominance, Starbucks has been able to withstand the challenge.
The Seattle coffee giant snags exclusive leases for the finest locations, helping to cement its advantage. In addition, Starbucks has added smoothies, tea, and a revamped food menu, increasing its appeal. It recently announced a plan to test selling alcohol in some markets.
Last year, Starbucks purchased juice maker Evolution Fresh and began selling “blonde” coffee, the company's lightest roast yet. The newest offering is expected to help Starbucks beat back McDonald's and Dunkin' Donuts, which both brew lighter roasts than Starbucks.
In November, Starbucks began selling its coffee and Tazo tea for Green Mountain Coffee Roasters' popular Keurig machines. Those machines have a dominant 80 percent stake in the fast expanding North American market for single-servings brews.
Overseas growth
With more than 14,000 stores already in the United States, the bulk of Starbucks’ growth in coming years likely will come from overseas. It already has more than 6,000 stores in more than 50 foreign countries, according to Morningstar.
The chain’s growth potential is particularly strong in emerging markets, such as China, Brazil, and India. Starbucks has more than 700 stores in China now and plans to hit 1,500 by 2015.
During the quarter ended Jan. 1, Starbucks was able to increase its profit by 10 percent to $382.1 million from a year earlier. Revenue gained 16 percent to $3.44 billion.
Standard & Poor’s analyst Jim Yin has a hold rating on Starbucks shares. “We think the company's revitalization agenda is on the right track, and that the restructuring and cost cutting . . . have resulted in a material improvement in fundamentals, with positive trends seen continuing through fiscal year 2012,” he writes.
Starbucks stock provided an annualized total return of 76.23 percent over the past three years.
The company next reports earnings around April 26.
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