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Suravi Thacker
Suravi Thacker
Articles (157) 

Starbucks Is a Strong Investment for All Times

June 16, 2014 | About:

Expansion into new regions is one of the most lucrative ideas for companies who want to fight the macroeconomic woes. Most retailers have been eyeing international expansion in order to grow their revenue, and the coffee maker Starbucks (NASDAQ:SBUX) is not an exception.

The leading coffee maker is planning to expand its footprint in Europe by opening a number of new stores in the region. This looks like an interesting step since Europe is showing recovery and demand has been growing for retail goods.

The Coffee Maker Is Growing Stronger…

Starbucks’ growth in the European region has been quite slow, which instigated the retailer to work on its expansion plans in the region and make people more aware of its presence. From a small footprint Europe, limited to stations and airports, the company is expected to have standalone stores in various city areas. This move is a part of its long term strategy to expand in areas such as the Middle East, Europe and Africa.

Moreover, the company is not only focusing on geographic expansion, but also on product expansion. It’s all new single serve coffee brewer hit the market some time back and is doing really well. The brewer is called Verismo, and the company expects the market to grow rapidly. Also, Verismo has been priced strategically against other competitor’s products, which is attracting more and more customers at a rapid pace. The pricing starts at $99 and is expected to contribute $0.06 to $0.09 per share to its bottom line by the year 2016.

However, Starbucks is not the first company to enter the single cup market. It faces stiff competition from Keurig Green Mountain (NASDAQ:GMCR), the first company to introduce single serve brewers. Its Keurig brewers have captured 90% of the single cup market in the U.S. The growing market for single cup espresso motivated Green Mountain to introduce espresso machine in partnership with an Italian coffee maker. Hence, competition in this segment is expected to become even more interesting.

Some More Moves….

Starbucks, apart from geographic and product expansion, is moving into diversifying and fortifying its product portfolio for its customers. It acquired Evolution Fresh, a juice making company, in order to expand its portfolio of offerings into healthier options. As consumers are getting more health conscious this has become an obvious choice for most of the beverage companies.

Even Coca-Cola (NYSE:KO), a leading beverage provider, had diversified its offerings to fruit drinks with the acquisition of Aujan Industries. Taking over Aujan will not only help Coca-Cola target health conscious customers, but will also help the beverage giant to enter the Saudi Arabian market. Aujan’s popular Barbican beverage and the British fruit drink, particularly for Muslims, will help Coca-Cola push its revenue higher.

Coming back to Starbucks, it is also planning to back its new products with a lot of advertising. It has been promoting Verismo heavily, which is luring customers to its stores more often. In fact, even Green Mountain had followed a similar strategy when it had first introduced Keurig brewers to the consumers.

Final Thoughts

Starbucks is a growing company. It keeps formulating new strategies to lure more customers. Expansion into new markets and the introduction of new products makes Starbucks look increasingly attractive. Also, its new payment option provided through the mobile payments deal with Square has made customers happy. Making payments has become very easy for people. With so many positives working in favor of this coffee giant, I think it is worth an investment.

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