“It is inhumane, in my opinion, to force people who have a genuine medical need for coffee to wait in line behind people who apparently view it as some kind of recreational activity.”―
STARBUCKS LEADS THE PACK
The Pandemic has seen consumer needs change dramatically. Starbucks, one of the largest coffeehouse chains in the world has woken up to this fact and is now offering more ways to meet new demands. Lovers of a cup of Juan Valdez’s finest can now order from Starbucks via pickup, drive-thru or delivery.
Starbucks has responded proactively and effectively to the pandemic and sales are recovering. The company’s drive into new pickup stores which will leverage its Mobile Order and Pay and Rewards Infrastructure could further push Starbucks ahead of the chasing pack. Competitors will find it difficult to compete as they do not have the same level of reward members or such advanced technologies.
Starbucks should emerge from this difficult period in a more dominant position despite the losses suffered as a result of store closures. Revenue from Q1 fell just 6% year over year. Not bad considering the mass store closures worldwide. More than 90% of Starbucks U.S. coffee stores are now open.
CHINA GAINS
Starbucks main rival in China, Luckin Coffee, suffered a major setback recently with news of a serious accounting fraud. The company admitted that up to 40% of its sales had been invented out of thin air. While Luckin Coffee has lucked out, Starbucks opened up 57 new stores in April and May, with plans to open 500+ new stores this year. There are also plans to expand its ‘Now’ concept in China, providing pickup and delivery services.
CASH COW
One of our analysts remarked ‘Starbucks is a cash cow and very well managed. Don’t forget the sugar. Most millennials would puke if they drank a regular coffee or an expresso. They crave the sugar more than the coffee. Starbucks deliver it in spades. A Venti Caramel Double Frappucino blended with whipped cream and syrup. Can you make that with soy or almond milk? Sure, that will be $15…..WTF’.
We went long Starbucks Corporation (SBUX) on 23 March with an entry price of $56.53. We are currently +38% on the addicton trade