Starbucks SWOT analysis 2017

| February 1, 2017

Company Background

Key Facts
Name Starbucks Corporation
Logo
Industries served Restaurants (Coffeehouses)
Geographic areas served Worldwide (25,085 coffeehouses in 75 countries)
Headquarters Seattle, Washington, United States
Current CEO Howard Schultz
Revenue US$21.316 billion (2016) 11.2% increase over US$19.163 billion (2015)
Profit US$2.818 billion (2016) 2.1% increase over US$2.757 billion (2015)
Employees 254,000 (2016)
Main Competitors Caribou Coffee Company, Costa Coffee, Dunkin' Brands Group, Inc., Green Mountain Coffee Roasters, McDonald's Corporation, Nestlé S.A. and many other restaurant chains and coffeehouses.

Starbucks Corporation’s business overview from the company’s financial report:

“Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 75 countries. We purchase and roast high-quality coffees that we sell, along with handcrafted coffee, tea and other beverages and a variety of fresh food items, through company-operated stores.

We also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed stores, grocery and national foodservice accounts. In addition to our flagship Starbucks Coffee brand, we also sell goods and services under the following brands: Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange and Ethos.

Our objective is to maintain Starbucks standing as one of the most recognized and respected brands in the world. To achieve this, we are continuing the disciplined expansion of our global store base, adding stores in both existing, developed markets such as the U.S., and in newer, higher growth markets such as China, as well as optimizing the mix of company-operated and licensed stores in each market.

In addition, by leveraging the experience gained through our traditional store model, we continue to offer consumers new coffee and other products in a variety of forms, across new categories, and through diverse channels. We also believe our Starbucks Global Responsibility strategy, commitments related to ethically sourcing high-quality coffee and contributing positively to the communities we do business in, and being an employer of choice are contributors to our objective.

Starbucks® company-operated stores are typically located in high-traffic, high-visibility locations. Our ability to vary the size and format of our stores allows us to locate them in or near a variety of settings, including downtown and suburban retail centers, office buildings, university campuses, and in select rural and off-highway locations. We are continuing the expansion of our various store formats, including Drive Thru and express stores, to provide a greater degree of access and convenience for our customers.

Starbucks employed approximately 254,000 people worldwide as of October 2, 2016.”[1]

Starbucks SWOT Factors

Strengths

1. Operating efficiency and strong growth leading to superior financial performance.

2016 marked continuing Starbucks growth both financially and physically. The company had yet another great financial year. The company’s revenue grew by 11.2% and 2,042 new stores were opened. Starbucks’ operating profit margin increased and its cash flow grew to a record high of US$4.575 billion, despite the company’s enormous expansion.

Figure 1. Starbucks’ consolidated revenue 2011-2016

Starbucks' revenue grew from US$11.7 billion in 2011 to US$21.3 billion in 2016.

Source: Starbucks financial report[1]

Figure 2. Starbucks’ operating profit margin 2012-2016

Starbucks' operating profit grew from 15% in 2012 to 19.6% in 2016.

Source: Starbucks financial report[1]

Figure 3. Starbucks store count 2011-2016

The number of Starbucks stores grew from 17,003 in 2011 to 25,085 in 2016.

Source: Starbucks financial report[1]

Starbucks’ balance sheet has remained strong. In 2016, debt-to-asset ratio remained the same, while cash reserves increased significantly. The company’s net profits increased only slightly from US$2.757 billion to US$2.818 billion, but the operating profit margin grew to 19.6% highest in Starbucks’ history. Overall, Starbucks’ financial position has never been stronger.

What does this mean for the company? Despite its huge growth, growing the operating profit margin while also increasing its net profits means that Starbucks is managing its operations very efficiently. In addition, the company’s healthy financial numbers provide confidence for investors and allow the company to engage in speculative investments that wouldn’t otherwise be feasible.

2. Fast growing store network in China.

Currently, Starbucks has 2,382 restaurants in China, which is more than Dunkin’ Donuts (22) [2] and Costa Coffee (383)[3] combined, and second only to McDonald’s (2,640).[4] The number of Starbucks locations has grown significantly over the past few years. In 2011, the company had only 570 coffeehouses in China. Since then it grew its presence by 1,812 locations or 418% in just 5 years.

Figure 5. Number of Starbucks locations in China 2011-2016
2011 2012 2013 2014 2015 2016
Number of locations 570 700 1,017 1,367 1,811 2,382
Growth over previous year - 22.8% 45.2% 34.4% 32.5% 31.5%

Source: Starbucks’ financial report[1]

China is the second fastest growing Starbucks market behind the U.S. and the company is well positioned to compete in it. For years Starbucks has been strengthening its tea offerings, which is the favorite Chinese drink. The company currently owns 2 tea brands, Tazo and Teavana, and serves brewed tea, single-serve tea, packed tea and other related tea products. Therefore, unlike its rivals, Starbucks is better prepared to satisfy Chinese tastes and to attract Chinese customers to its coffeehouses.

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Published: February 1, 2017
Format: PDF
Pages: 27
Price: USD $19

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