Coffee vs. Semi?

When in comes to strategy, it pays to have a closer look at the global market leaders which are -in general- the quality assets in terms of their operations, services and financials performance.

As discussed before, #Starbucks is one these with sticky and loyal customer base.

It hosted Investor Day on 9/13 at which the management surprised the market players by guiding 3-year outlook of EPS growth 15-20%, driven by investments in partners, customers and stores. The announced algoritm includes 10-12% revenue growth, global unit growth of 7% and US SSS (same store sales) 7-9% and progressive #marginimprovement.

Demand for the company’s products show no slowdown despite price incereases. Analysts argues that this achievement is closely tied to a number of factors including its sophisticated digital ecosystem, most frequent customer base in restaurants (1-2x a week), product portfolio that is difficult to replicate i.e. highly personalized product mix. The latter is also a serious challenge in terms of store productivity. Majority of the bestseller products at #SBUX (Cold Brew for instance) have labor intensive processes. This not only increases average #waitingtime by customer at the delivery desk (which is an important problem if someone is waiting you at a table or if you are just passing by a store) but also increases the pressure on the staff in the stores that are designed to fill 1,200 orders daily but actually serve around 1,500 on average.

Management is planning to leverage on the technology (#automatedordering for beverages, coffee and merchandise, #loadbalancing between stores to deal with peak hour demand, deployment of AI tools to improve wait times) and HR tools (better compensation, career planning) to deal with “good problems” they have in the system under consistently increasing demand. Will have a close eye on these fronts.

It will also be interesting to track what the management shall do for the Delivery which is a small (2% of revenues) but growing channel for the company. SBUX has an exclusive partnership with Uber Eats which shall become non-exclusive following the planned launch with DoorDash next year.

If the guidance will be achieved, SBUX could well be benchmarked with the Tech stocks in terms of growth. Comparing coffee with semiconductors or online advertisement!

Strategy is a great domain to involve.