Starbucks Shares

Back in the year 2008 the company’s founder, Howard Schultz, came back as CEO and he made some
tough decisions.

 He cut staff

 He closed locations

 He introduced new products( like instant coffee).

This strategy has been spot on because over the past three years the annual average return on the stock
has been 40.6%.

Pros

Growth catalyst. Starbucks plans to sell the highly popular K-Cups from Green Mountain’s Keurig
machine(recyclable cups safe for the environment).
In light of its massive distribution footprint, this high-margin offering is likely to be a nice boost for the
top line.

International. There is much room for growth in foreign markets. To this end, Starbucks has been
making substantial investments in China. That country’s rising affluence has made premium coffees
quite popular. Starbucks believes it can double the number of locations to 1,500 over the next five
years.

Mobile. Starbucks has always been at the forefront of digital innovations. For example, the company has
launched several apps for iPhone and Android phones to allow for mobile payments. The result has been
increased customer loyalty and store traffic.

store locator,
nutrition-based information
rewards programme,

This has helped the company come up with trend-setting ideas.

'MyStarbucksSignature'
This allowed consumers to develop their own signature drinks , name it and share the new flavour with
the community.
In this way, Starbucks informs the consumer of the wide range of product offering they have at their
stores across the world. The only modification a consumer can do on the signature drink is in the
ingredient mix and quantity. This way the supply network is only slightly disrupted at the retail and
service end. Everything else related to ingredients and distribution remains completely untouched.
Cons

Competition McDonald’s and Dunkin’ Brands provide high-quality offerings at discount prices. At the
same time, Starbucks faces tough rivals on the premium side of the market, like Caribou Coffee and
Peet’s Coffee

Costs. While Starbucks has diversified its product offerings, the fact is that it relies heavily on coffee,
which can be quite volatile in terms of costs. Thus, if there is bad weather or even geopolitical problems,
there could be supply issues.

Economy. Unfortunately, based on the latest government reports, the U.S. economy appears to be
slowing down. Will consumers be willing to pay high prices for coffee, or will it continue to be an
“affordable luxury”?

Verdict

As seen with the latest quarterly report, Starbucks continues to show lots of momentum. Its net income
was up 34% to $279.1 million while revenue was up 12% to $2.9 billion.

Looking over the next couple years, Starbucks should continue to get traction from its new product
offerings as well as the launch of the K-Cups offering, which are a game changer.

In addition, Starbucks is a big play on emerging markets, even though it is still in the early stages. For
investors, the pros outweigh the cons on the stock.

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An environment where employees could think freely about the organisation and contribute in terms of
strategies and ideas was fostered. As a result, a community involvement concept was developed.

In March 2008,"My Starbucks Idea" was rolled out for customers to exchange ideas with each other and
directly with the company. As part of this, customers were able to give opinions on everything such as
products, services, layout, advertising, corporate social responsibility, in-store music and so on.

More than 93,000 ideas were shared by about 1.3 million users on social media, and page views per
month rose to 5.5 million.

Through the "My Starbucks Idea" customers had a direct link with the headquarters and Starbucks
implemented over 100 ideas. Through this initiative, the coffee retailer built a robust fan base. By giving
customers a platform to voice their ideas for the brand and by responding to it.

Starbucks soon realised that it had to project its 'cool' element via social media-based marketing. The
organisation must never look desperate or too keen to increase its sales. So the company refrained from
pushing too many products, causes or offers to its followers. The focus was more on building and
engaging with the community.
One of the accidental tweets from Starbucks was just a smiley face that received a lot of admiration
from the community.
Tweets such as 'keep calm and make coffee' is in line with its idea of keeping a cool image and building a
community.