STARBUCKS PUSH FOR GROWTH TEMPERED BY UNCERTAIN CHINA MARKET

As part of Starbucks’ strategy to grow, they open more stores, ruthlessly control costs, and continuously introduce new items to market.

Their marketing has been on point resulting in them being a go-to destination for millennials and TikTok’ers who upload and share videos where they review the latest Starbucks innovation, often attracting hundreds of thousands of views.

In 2019, Starbucks added 1,900 net new stores. In 2018 and 2017, the company had added 2,300 and 2,250 net new locations. 

The situation, however, is not entirely rosy, as the company has underperformed their market, and the price of the stock can’t seem to find or maintain higher ground.

It was announced last week that Starbucks has appointed a new CEO to lead the company in China, Leo Tsoi, who faces a tough challenge to grow the coffee chain in one of its most important regions, despite China’s slower-than-expected economic growth.

Interestingly enough, Luckin Coffee may also challenge them, a company I thought would never recover from the wreckage of their massive fraud reported in 2020.

In addition, the company is facing slowing sales, tense political relations between China and the US, uncertainty about the tax changes in the country, and now competition from a company that shouldn’t have survived.

Since they see much of Starbucks’ future growth already factored into the stock price, many investors have decided to keep their hands off accumulating more Starbucks shares.

As the fiscal year ends in September, the company will be working on its annual report.  My interest will be piqued by what risks are identified and what the independent directors have to say. 

With so much of the company’s sales dependent on RTD and cold drinks, I personally want to understand what risks may exist in that market.

It has been a long time since Starbucks was a coffee company and now it really makes its money off milky, sugary drinks. Am I being dramatic? Check out their 52-page menu and nutrition guide here and the calorie column before you answer that question. 

Is it even relevant to review their future in the context of the coffee industry or could America’s largest chain of coffee stores be more accurately described as a supercharged milkshake company? 

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