Starbucks Q3 FY 2016 Earnings Preview: Continued Focus On China, Expansion Of The Single-Serve Segment To Drive Results

by Trefis Team
+18.70%
Upside
55.09
Market
65.39
Trefis
SBUX
Starbucks
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Key Trends:

1) Expanding the single-serve segment in China/Asia Pacific (CAP) and Europe

  • Leading market share in the U.S. in premium roast and ground, and single-serve segment.
  • Leveraging its retail store footprint and customer relationships in China to expand its single-serve segment across the CAP region.
  • Partnership with Nestle to sell Starbucks branded Nespresso compatible pods in Starbucks retail markets around the world, starting with Europe.

2) China, the key growth market

  • Starbucks has over 2,000 stores in 100 cities in China, and is adding over 10 new stores every week to leverage the growing middle-class population. It aims at increasing its store count in China to over 3,400 by the end of 2019.
  • A partnership with Tingyi, a Taiwanese drinks maker, will provide Starbucks with over 1 million points of ready-to-drink Frappuccino distribution in China.
  • Scheduled its third roastery opening in China.
  • Focus on accelerating sales of Teavana handcrafted tea beverages.

3) Digital and other innovations

  • Changes to the Starbuck rewards program may adversely affect top-line in Q3.
  • Introduction of true real-time personalization to help with targeted marketing.
  • Mobile Order & Pay continues to be increasingly embraced by customers.
  • Innovation in cold beverages, including iced black coffee, refreshers with coconut water, and product line extensions for Frappuccino and Doubleshot Energy drinks to support revenue growth.
  • Challenging consumer, economic, and geopolitical environment across EMEA may cause a slowdown in the region for the company.

Have more questions on Starbucks? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Starbucks

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