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Starbucks $SBUX doubling down on the UK market
Starbucks $SBUX has announced plans to open 100 new stores across the UK over the next year.
- Opening new branches and refurbishing and upgrading existing sites over the next three years
- £30million overall investment
- Currently has over 1,000 outlets in the UK
- Plans to open 300 new stores in the rest of Europe, the Middle East and Africa
- About 70% of Starbucks UK shops are run as franchises, with the remainder owned by the company
Source: AP
As a long time Starbucks shareholder, I hope this will be a resounding success that moves the bottom line.
Starbucks is an interesting stock for us because in our home country Australia, Starbucks is not successful at all. In fact, it's downright failed down here to the point where they closed 70% of their stores back in 2008. We're a coffee drinking nation and meeting for coffee is an ingrained social custom. Yet in a nation of 25 million people, there are only 61 Starbucks outlets, almost all of them in tourist locations. There are none in the East Coast of Australia (Perth etc). Starbucks only serves the tourist market, while the lucrative business district and suburban market goes largely untapped. Starbucks can't seem to make any inroads here.
It's true that we are mostly a nation of coffee snubs. We prefer are coffee artisanal, richer, bolder and more flavourful than what the typical Starbucks brew offers. McDonalds and Gloria Jeans dominate the low end market. A myriad of private cafes and established cafe chains dominate the mid to high end. Neither of us can drink a standard Starbucks long black, it's far too weak (it's hot water with a hint of coffee flavouring). If we're forced to drink a Starbucks overseas, we'll ask for a double shot expresso in a short cup + a separate side of hot water. We'll add our own water to taste.
If Starbucks were to make any inroads into the local coffee culture, they'd probably have to roll out their Starbucks Reserve Roastery concept rather than the standard stores. Not unless they change the fundamental way they make coffee in the standard stores. They just haven't adapted their style of coffee to local tastes.
The failure of Starbucks in Australia means we can't do any "boots on the ground" research when it comes to keeping tabs on the continuing success of the business. We have to ignore the fact that the brand can't make inroads here, and rely on news reports and quarterly results to gauge how well the business is doing overseas. With our McDonalds (MCD) shares, we can see the unwavering popularity of the business here in Australia. It's an interesting disparity.
@jazziyoung I have to say, when I was based out of London for 2 years, Starbucks was never as crowded as McDonald's! Quite the opposite in the US - everywhere I go, there is always a line for Starbucks coffee...
@jazziyoung Very relevant points and I think your example is excellent. Similar to it is the fact that Starbucks $SBUX is virtually non-existent in Italy as well. As a generic place to go, Starbucks $SBUX is great. However, if you really like to have a good coffee, this can hardly be your place to go. Also, the example below confirms the fact that there is a big difference to the amounts of caffeine used when brewing drinks in Starbucks vs their direct competitors, at least in the UK (you can make your own conclusions when we speak about independent quality coffee shops as well).
Nice move, looking forward to visiting one!
People drink more coffee. (they need caffeine)
@rihardjarc And energy drinks ... 🙂
@kostofff yeah..Altho energy drinks I think are much worse for the health as a cup of coffee. Heard many even young people get heart arrhythmia.
I didn't realize Starbucks franchised its stores. Do they do this in the U.S. as well?
Yes. Below is the latest data from their Q1 2023 Earnings Report. About 41% of total estate in North America and about 57% on the International side.
Source: Starbucks Q1 2023 Earnings Report
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