Starbucks Top Line To Grow By 10% in FY 2019

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Starbucks (NASDAQ: SBUX), whose stock is currently trading at around $90, generates its revenue primarily from its Company owned Stores segment which is projected to account for 84% of total revenues in FY 2019, while the Licensed stores segment is expected to be the 2nd highest contributor to the Top line at 10.4%. In this note we discuss the revenue segments of Starbucks, their historical performance, and expected Total Revenue for FY 2019. You can look at our interactive dashboard analysis ~ Starbucks’ Revenues: How does Starbucks make money? ~ for more details. In addition, here is more Consumer Discretionary data.

 

Starbucks Business Model:

What Does Starbucks offer?

  • Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 78 markets. Formed in 1985, Starbucks’ purchases and roast high-quality coffees that they sell, along with handcrafted coffee, tea and other beverages and a variety of high-quality food items through company-operated stores.
  • They also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed stores, grocery and foodservice accounts. In addition to their flagship Starbucks Coffee brand, they sell goods and services under the following brands: Teavana, Seattle’s Best Coffee, Evolution Fresh, La Boulange, Ethos, Starbucks Reserve and Princi.
Starbucks has 4 Operating Segments-

1) Americas, which is inclusive of the U.S., Canada, and Latin America: Americas segment include both company-operated and licensed stores. The Americas segment is the most mature business and has achieved significant scale.

2) China/Asia Pacific (“CAP”) & 3) Europe, Middle East, and Africa (“EMEA”): CAP and EMEA segments include both company-operated and licensed stores. Certain markets within the CAP and EMEA operations are either in various stages of development or undergoing transformations of their business models.

4) Channel Development: Channel Development segment includes roasted whole bean and ground coffees, Seattle’s Best Coffee ® , Starbucks- and Teavana-branded single-serve products, a variety of ready-to-drink beverages, such as Frappuccino ® , Starbucks Doubleshot ® , Starbucks Refreshers ® beverages and Teavana TM/MC iced tea, and other branded products sold worldwide outside of our company-operated and licensed stores.

 What Are The Alternatives?

  • Major competitors are companies like: Dunkin’ Brands, Luckin coffee, and other coffee chains.

What Is The Basis of Competition?

  • The specialty coffee market is intensely competitive, including with respect to product quality, innovation, service, convenience, such as delivery service and mobile ordering, and price, and there is a continuous increase in competition in all these areas with the company’s channels and markets.

Starbucks’ Total Revenue has grown by 16% between FY 2016 and FY 2018, and is expected to grow by 10.3% in FY 2019:

  • Starbuck’s total revenues grew from $21.3 billion in FY 2016 to $24.7 billion in FY 2018. This represents an increase of approximately 10.3%.
  • We forecast the revenues to be around $27.3 billion in FY 2019, reflecting a increase of 10.3% y-o-y primarily due to Company owned stores segment.

 

Revenue growth of about $3.4 billion over two years driven by primarily contribution from Company Owned Stores:

  • The company operated stores are the highest contributor to total revenue and have seen tremendous growth over the years. The segment revenue has increased from $16.8 billion in 2016 to $19.7 billion in 2018. Trefis estimates revenue from the segment to be around $22.9 billion in FY 2019.
  • Licensed Stores segment has seen a good growth the past few years as the company continues to add stores. The segment revenue grew from $2.2 billion in 2016 to $2.7 billion in 2018. Trefis estimates revenue from the segment to be around $2.8 billion in FY 2019.
  • The consumer packaged goods segment is expected to have a fall in revenue after the company’s deal with Nestle. The results from which are expected to start from FY 2020 onward. Trefis estimates revenue from the segment to be around $1.5 billion in FY 2019.

 

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