Starbucks SWOT analysis 2016

| October 19, 2016

Company Background

Key Facts
Name Starbucks Corporation
Industries served Restaurants (Coffeehouses)
Geographic areas served Worldwide (23,043 coffeehouses in more than 68 countries)
Headquarters Seattle, Washington, United States
Current CEO Howard Schultz
Revenue US$19.163 billion (2015) 16.5% increase over US$16.448 billion (2014)
Profit US$2.757 billion (2015) 33.3% increase over US$2.068 billion (2014)
Employees 238,000 (2015)
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 68 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 238,000 people worldwide as of September 27, 2015.”[1]

Starbucks SWOT Factors


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

2015 was one of the best financial years in Starbucks’ history. The company’s revenue grew by 16.5%, profit grew by 33.3%, its debt-to-asset ratio decreased, and 1677 new stores were opened. Starbucks’ net profit margin increased and its cash flow grew to a record high of US$3.749 billion, despite the company’s enormous expansion.

Figure 1. Starbucks’ consolidated revenue 2011-2015

Starbucks' revenue was US$11.7, US$13.3, US$14.9, US$16.4 and US$19.2 billion in 2011, 2012, 2013, 2014 and 2015, respectively. Starbucks revenue grew 9.3%, 13.5%, 12.0%, 10.6% and 16.5% in 2011, 2012, 2013, 2014 and 2015, respectively.

Source: Starbucks financial report[1]

Figure 2. Starbucks’ consolidated profit 2011-2015

Starbucks' profit was US$1.25, US$1.38, US$1.72, US$2.07 and US$2.76 billion in 2011, 2012, 2013, 2014 and 2015, respectively. Starbucks profit grew 31.7%, 11%, 24.4%, 20.1% and 33.3% in 2011, 2012, 2013, 2014 and 2015, respectively.

Source: Starbucks financial report[1] (2013 profits do not include a pre-tax charge of US$1.713 billion)

Figure 3. Starbucks’ assets and long-term debt

Starbucks' assets were US$7.36, US$8.22, US$11.52, US$10.75 and US$12.45 billion in 2011, 2012, 2013, 2014 and 2015, respectively. Starbucks' long-term debt was US$0.55, US$0.55, US$1.3, US$2.05 and US$2.35 billion in 2011, 2012, 2013, 2014 and 2015, respectively.

Source: Starbucks financial report[1]

Figure 4. Starbucks consolidated store count

The number of Starbucks stores grew from 17,003 in 2011 to 23,043 in 2015.

Source: Starbucks financial report[1]

Starbucks’ balance sheet has remained strong. Its debt-to-asset ratio has decreased meaning that the company has increased its assets faster than its debt. The company has been able to maintain the same 18.7% operating profit margin, while increasing its net profit margin from 12.6% to 14.4%. Overall, Starbucks’ financial position has never been stronger.

What does this mean for the company? Despite its huge growth, maintaining the same operating profit margin while increasing its net profit margin 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.

Starbucks currently owns 1,811 restaurants in China, which is more than Dunkin’ Donuts (16)[2] and Costa Coffee (344)[3] combined, and second only to McDonald’s (2000+).[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 growing its presence by 1,241 locations or 318% in just 4 years.

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

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: April 27, 2016
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