Monthly Notes On Coffee Industry: Starbucks & Keurig Green Mountain
Coffee production in Indonesia, the third-largest producer of Robusta coffee beans, might decline roughly 20% next year primarily due to the impact of a strong El-Nino this year. [1] According to Bloomberg analysts, the harvest may drop to 560,000 metric tons in the next year. Moreover, in the second week of January, coffee prices slid down on the speculation that the Brazilian harvest could yield 20% more coffee than expected. [2] As a result, Arabica coffee futures for March contract dropped 3.5% on the ICE futures market.
Here are some updates related to the coffee companies covered by Trefis:
- Down 7% Since 2023, Can Starbucks’ Stock Reverse This Trend Post Q1 Results?
- Down 26% From Its Pre-Inflation Shock High, What Is Next For Starbucks Stock?
- After 6% Drop This Year, Pricing Growth To Bolster Starbucks’ Q4
- Can Starbucks Stock Return To Pre-Inflation Shock Highs?
- Starbucks’ Stock To See Little Movement Past Q3?
- Starbucks Stock To Likely Trade Lower Post Q2
Starbucks Corporation (NASDAQ: SBUX) maintains its dominance in the industry after it delivered yet another strong earnings result. The highlight for the specialty coffee company was its development progress and future plans in Asian markets. According to Trefis estimates, beverage spend per customer visit rose more than 10% year-over-year (y-o-y) in 2015 to $5.22, despite the decline in daily customer traffic per store, which was primarily due to an increase in the number of stores. The company’s Seattle roastery managed to attract more customers and visitors while simultaneously acting as a platform for Starbucks’ ultra-premium reserve brand. The company seems positive in achieving its target of 500 reserve stores in key markets.
Apart from new store additions, Starbucks is confident with its new initiative in China, including the social gifting and digital Starbucks gifts. Moreover, the introduction of the loyalty program and expansion of ready-to-drink products in China are the near-term goals for the company. Recently, the company mentioned its plans to bring its specialty tea brand, Teavana, to India in 2016. India is a major consumer of tea and Starbucks has been a huge success in the country. The introduction of Teavana, with the brand name of Starbucks backing it up, might just be a game-changing move from the company. With close to 80 stores, the growth of the company in India is faster than any other region, as claimed by the company’s officials. ((Starbucks, Q1 2016, Earnings call transcript))
SBUX’s stock fluctuated between $57 and $60 for the entire month of January. Our price estimate for SBUX stock is $65, which is roughly 8% above the current market price.
Keurig Green Mountain (NASDAQ: GMCR) is going private under a $13.9 billion buyout deal. On December 7, 2015, Keurig Green Mountain and JAB Holding Company, a Luxembourg-based privately held group, agreed to enter into a deal under which the latter will acquire the former for $92 per share in cash, making it a total acquisition of $13.9 billion. [3] The stock had declined from $150 in November 2014 to $40 in November 2015 on poor quarterly results, diminishing market share, and lowered guidance. Soon after the announcement of the news, the stock skyrocketed from $50 to $88, but still remained below JAB’s offer price of $92.
GMCR’s stock has been trading close to $90 since the announcement of its acquisition.
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