Starbucks Corporation
(
SBUX
) recently announced that it plans to open its sixth manufacturing
unit in Rancho Cucamonga, California toward the end of fiscal 2013.
It will will be a juicery costing $70 million and is expected to
create 160 manufacturing jobs.
The company acquired super premium juice company Evolution Fresh
Inc. in November 2011, in order to expand the company's product
portfolio beyond coffee to the health food segment.
Production and distribution of Evolution Fresh juices is expected
to increase fourfold when manufacturing shifts from the San
Bernardino, CA plant to the new juicery with state of-the-art
equipment. The increase in capacity is necessary in order to meet
the growing demand for healthy food products. The new facility will
manufacture juices using cold-crafted technology, which will help
retain the nutritional value of the fruit, thus appealing to the
large number of health conscious customers.
In order to cater to the growing number of health-conscious
customers, the company announced that its super-premium cold
crafted Evolution Fresh juices will be available in new flavors at
some select stores on the West Coast. The new flavors are cucumber
pineapple ginger, pineapple coconut water, spicy lemonade and new
raspberry watermelon.
Starbucks expects higher capital expenditure in fiscal 2012 than
fiscal 2011, due to investments in store renovations and
manufacturing capacity. The company expects total capital
expenditure for fiscal 2012 to be about $900 million. The
investment in the new plant in Rancho Cucamonga, California is in
line with these plans.
Starbucks carries a Zacks #4 Rank in the near term (Sell rating).
We appreciate Starbucks' strong market position, new product
launches, rapid growth in China as well as a solid turnaround in
its U.S. business. However, Starbucks' results in the third quarter
of 2012 have been lower than expected, due to soft consumer traffic
trends in the U.S. in June and a weakening global consumer
environment. Further, poor sales in Europe due to depressed
macroeconomic conditions and the rising cost of commodities,
especially coffee, also concerns us.
Based in Seattle, Starbucks Corporation is the leading retailer of
specialty coffee worldwide. The company buys and roasts
high-quality whole bean coffee, which is sold along with
handcrafted coffee and tea beverages and a variety of fresh food
items.
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