Over the last couple of years, Starbucks Corporation (
) has made a number of acquisitions to foray into new segments. The
strategy is to diversify its offerings in the relatively saturated
American market while leveraging the brand name to expand
internationally. In America, Starbucks still sees room for
expansion for its traditional coffee stores as the company plans to
add 1,500 new stores in the next five years, although 60% of them
will be drive-through stores. Besides the coffee stores, let's take
a look at what else is brewing up at Starbucks.
See our full analysis for Starbucks
Tea is another category towards which Starbucks is focusing its
attention. The company already had the Tazo brand in its portfolio,
but it went ahead and purchased Teavana for $620 million at the end
of 2012. Eventually, it plans to operate Teavana stores in the
same way that it runs its namesake coffee stores. Presently, the
company is going about things slowly, with plans to add 30 stores
under the brand by the end of the year.
It's important to note that opening new stores involves a lot of
behind-the-scene activities like setting up the supply chain,
finding real estate and the right employees, and integrating the
company's brand philosophy. All of this takes time and could be a
reason for the rate of addition to be relatively slow during the
The Verismo is seen as the biggest threat to Keurig's brewers,
although we believe that the latter will continue to be the market
leader, given its high degree of compatibility with private labels
and third parties. However, this does not undermine the product's
importance to Starbucks. With 150,000 Verismo machines sold within
the first three months of the launch, the brewer has had a good
With a retail price of about $200, the Verismo would have
generated sales of $30 million in the previous quarter alone, and
the sales of coffee pods would have been additional. As the
product's distribution rises and new beverages/flavors are added,
we can expect to see its sales rise further.
3) Evolution Juices:
Evolution is a $30 million juice company acquired by Starbucks in
November 2011. Its bottles are already present in 4,000 of its
company-operated stores. Starbucks is currently building a
state-of-the-art 'juicery' which is scheduled to open in spring.
After the inception of the juicery, Evolution juice bottles will be
available in 8,000 of its stores by the end of the year.
have a $56 price estimate for Starbucks
, which is in line with the current market price.
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