Thursday, October 26, 2006

Lots of Lattes: Sipping Starbucks & the China Expansion

Cutting our addiction to expensive take-out coffees, (lattes, frappes & moccas) is the flavor of the month in many frugal circles, including mine. The rationale: save $600 to $1,000 a year, (before compound interest) by reducing our intake of expensive caffeine treats at Starbucks and the other frothy caffeine shops.

Are we really cutting back? Honestly, I don't think so. Somebody out there is sipping lots of lattes. Just look at the recent financial reports percolating from Starbucks, a publicly traded company on Nasdaq (SBUX is the ticker symbol).

Revenue (sales of coffee and other Starbucks merchandise) is up big time, according to company report.

For the 52 weeks ended October 1, 2006, consolidated net revenues were $7.8 billion, an increase of 22 percent from consolidated net revenues of $6.4 billion for the same period in fiscal 2005. Comparable store sales increased seven percent for the 52 weeks ended October 1, 2006, compared to the same period ended October 2, 2005, marking the Company’s 15th consecutive year of five percent or greater comparable store sales growth.--Starbucks company report

Translation: Somewhere, somehow lots of somebodies are buying lots of take-out or sip-in-store coffee.

The robust flavor of the global coffee business has prompted Starbucks to increase its operations in China through a major buyout.

"We are now poised to expand rapidly in this important region two years before the 2008 Beijing Olympics.” said Jinlong Wang, president, Starbucks Greater China.

Personally, I think Starbucks is a quality company, with an admirable community service program and decent benefits packages for its employees. I even hang out at Starbucks cafes as an occasional treat and I’m a fan of their new music & coffee high-tech stores.

But every-now-and-then treats are one thing; I don’t need to be a regular contributor to the Starbucks bean-counting grind of $7.8 billion in revenue over the latest 12-month period.

I’ve got my own bottom-line issues to worry about. I’ll brew my own coffee, with a few weekend lattes for good behavior. Or maybe a shot of espresso after work as a little bonus or when I'm stressed out and need a fix. Or maybe, I'll just stop grinding my money.


prlinkbiz said...

Did you know there are more Starbucks in China now than in the USA? I am a Starbucks fanatic- love it! It's alos my favorite place to sit and read or write or have snack with my kids. That being said, what's up with Starbucks being so cold these days?!! Are they trying to sell more cold drinks, or discourage us from hanging out? Either way- it's working! LOL

Steve Mertz said...

I'm not saying that I'm long Starbucks stock really need to continue supporting Starbucks :)

Bubbers said...

I believe that Starbucks is so popular because they are selling social connection. So many people meet at Starbucks for coffee and to TALK. Or people go to read the newspaper but be with other people. I actually meet at Starbucks with friends to SAVE money, because we do that instead of going out for a meal. It is human connection, to sit and chat over a cup of coffee. And now that we are a more mobile society we are not doing as much hospitality at home -- we're meeting out and getting out. I think it's a whole societal shift that's in play here, and Starbucks is providing connections that are otherwise being lost. In other words, it's about a lot more than the coffee!

Frugal Duchess: Sharon Harvey Rosenberg said...

Thanks to all of you for your comments.

Bubbers: you're right about the frugal use of Starbucks. Getting a coffee instead of paying for a restaurant meal is much cheaper.

I do that. But what about the every day lattes? Those really add up.

prlinkbiz said...

Yes, yes they do! I get a double tall non fat no whip cream mocha nearly everyday, and after school, I get my kids a cookie. I budget it in because it is part of the lifestyle I want. Bubbers totally nailed it- Starbucks is about the social connection. Amazing insight-

prlinkbiz said...

PS Steve- your stock is safe with