Why the Cutcher & Neale Investment Services Team loves Starbucks
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.
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