Starbucks plans to surpass McDonald's focus on expanding the Chinese market

Starbucks' long-term plan is to make it bigger than McDonald's.

In Starbucks’ ambitious plan for expansion, China will be a top priority

Due to rising share prices and good sales performance, Starbucks announced on the 5th of October that it will increase its long-term development goal and plans to establish 40,000 Starbucks coffee shops worldwide, of which 20,000 are overseas, which means that it is better than before. The target was increased by 10,000, which also means that it will exceed the current size of McDonald's, the fast food chain leader.

Fast expansion of franchise

Starbucks, headquartered in Seattle, is currently the world's largest coffee beverage retailer. As of early July this year, it had nearly 12,000 stores in 37 countries and regions, including more than 8,600 stores in the United States.

Starbucks' original expansion target was 30,000. The increase in long-term growth forecast is expected on Wall Street as early as possible: In recent years, Starbucks franchise stores have expanded rapidly at an annual rate of 500. Starbucks predicts that franchise expansion will increase by multiples at the end of 2007 to reach 1,000 each year. The average revenue will increase by 30%.

In the fiscal year ended in October, the company’s total net revenue was $7.8 billion, a 22% increase from the previous year. "The strong sales of Starbucks reflected the optimism of consumers," said Stephen Clone, an analyst at Goldman Sachs Group. "We think the company's September performance reflects consumers' dismissal of the economic outlook, just as consumers and Starbucks. In the summer, the pressure felt when oil prices rose."

RBC Capital analyst Larry Miller said in a text message to the customer: “We once emphasized that Starbucks is one of our favorite stocks. We don’t think it’s worthy of the growth of large-cap stocks, we also It is believed that the likelihood of accelerating sales growth at the same store is greater than the possibility of deceleration."

According to a financial report issued by Starbucks on October 4, the cumulative sales revenue of branches operating more than 13 months as of October 1 increased by 6% year-on-year. Affected by a series of good news, the company's stock price rose 7.6% on October 5, close to 39 US dollars.

However, Starbucks has not given a timetable for achieving this long-term goal, and only indicated that its number of branches in the fiscal year ending next fall will increase from the current 12,000 to 14,000. Starbucks also said that it will open branches in Brazil, Egypt, Russia and India next year to expand its business to more than 40 countries around the world.

China will become the biggest overseas market

Anne Sanders, senior vice president of global brand strategy and communications at Starbucks, said that the company decided to further expand its business due to the increase in the low-income and low-education consumer groups it hosted. The growth of Starbucks' future business will be able to support a substantial increase in the number of stores.

Jim Donald, CEO of Starbucks, said that the company's overseas market expansion focuses on China, India, Egypt, Brazil and Russia. Among them, China, which currently has more than 400 stores, will one day become the largest market outside the United States.

For investors' concerns about market saturation, Starbucks’ North American business has already faced a bottleneck, and Donald denied it. He said that Starbucks plans to distribute new target stores evenly across North American and overseas markets. Chang Starbucks is in the US flagship market and is attracting more and more Hispanics, women, and less affluent people to spend.

In addition, Starbucks founder, chairman of the board of directors Howard Schultz stressed that Starbucks in addition to optimistic about the opportunities for overseas business development, to expand the existing United States territory "feel unprecedented enthusiasm and positive." At present, the company only occupies 8% of the U.S. market, and there is still a lot of room for development.

Rising prices lead to loss of customers?

However, investors still have concerns about Starbucks. One of them is that Starbucks' recent price increase may lead to the loss of customers. Starbucks announced that it has raised the price of coffee drinks such as latte and cappuccino in Starbucks stores in the United States and Canada from October 3. Each coffee drink price has risen by 5 cents, an average increase of 1.9%. This is Starbucks Coffee's first price increase in two years. In addition to coffee drinks, the price of coffee beans in Starbucks stores will also be raised for the first time in nine years. The price per pound of coffee beans is about 50 cents, an average increase of 3.9%.

A spokesman for Starbucks said that the price increase was mainly due to the increase in transportation costs and operating costs caused by rising oil prices. Currently in the Starbucks store in the United States and Canada, the price of a latte is approximately $2.4 to $3.1.

Because Starbucks' stores outside of North America are mostly operated in partnership with local market distributors, unlike the North American region where the branches are mostly directly operated, the price increase of Starbucks coffee products will not affect North America. Branch other than.

Christine Cobb, an analyst at JMP Securities, pointed out that Starbucks' wave of price adjustments reflecting operating costs, due to its modest rise, coupled with Starbucks' original dominant position in the market, should not affect consumer purchase intentions.