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Why the Cutcher & Neale Investment Services Team loves Starbucks

July 2019

Starbucks is the largest coffee company in the world, with over 30,000 stores worldwide and expanding. Is it the taste of their coffee we love? No, far from it!

However, Americans are hooked and the Chinese, predominately a tea drinking nation, are beginning to get the taste for it.

While exceptionally strong in the US, Starbucks growth potential is in its global penetration, especially the relatively untapped Chinese market, which currently makes up just 2.6% of global coffee consumption.

Starbucks is opening a new store, on average, every 15 hours in China, where it has the first mover advantage.  With plans to add 600 new stores per year through the end of fiscal 2022.

The Chinese middle class is forecast to double in size over the next 4 years, which Starbucks are positioning themselves to take advantage of this shift to a more developed world lifestyle.

Statistics on the China market compared to US:

  • The average US consumer drinks around 300 cups of coffee a year.
  • The average Chinese consumer drinks less than 1 cup of coffee per year.
  • In the US, there are currently 14,500 Starbucks stores, roughly 1 per 20,000 people.
  • In China, there are currently 3,500 Starbucks stores, roughly 1 per 500,000 people (1 per 100,000 based on middle class statistics).

In addition to the Chinese growth story, Starbucks recently signed an alliance with Nestlé, to sell Starbucks products through their distribution system.

Nestlé has a distribution system throughout 190 countries and has the number 1 market share across all coffee products, furthering the Starbucks brand.

Love the coffee, perhaps not, but we are addicted to the overwhelming investment case for Starbucks.

Should you wish to discuss this or any other investment related matter, please contact our Investment Services Team on (02) 4928 8500.


Disclaimer

The material contained in this publication is the nature of the general comment only, and neither purports, nor is intended to be advice on any particular matter. Persons should not act nor rely upon any information contained in or implied by this publication without seeking appropriate professional advice which relates specifically to his/her particular circumstances. Cutcher & Neale Investment Services Pty Limited expressly disclaim all and any liability to any person, whether a client of Cutcher & Neale Investment Services Pty Limited or not, who acts or fails to act as a consequence of reliance upon the whole or any part of this publication.

Cutcher & Neale Investment Services Pty Limited ABN 38 107 536 783 is a Corporate Authorised Representative of Cutcher & Neale Financial Services Pty Ltd ABN 22 160 682 879 AFSL 433814.

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Topics: Growth, Superannuation, Investment, Investment Market, Investor

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