Starbucks Intrinsic Value Report

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Intrinsic Value Report
-Starbucks Corporation-

Table of Contents
Section
A. Starbucks Facts

Person in Charge

B. Industry Analysis C. Company Analysis I -Target Market & Position -Company Strategies -Competitive Analysis -Strength & Weakness D. Stock Recommendation

• • • • •

Starbucks is established in 60 countries worldwide It has a very well known brand name Starbucks will be opening in most of the Canadian Target stores Starbucks has signed an agreement to sell its Seattle’s Best coffee in US Burger Kings and to sell its food products in Canadian Sobeys food stores • After 4 decades of being in the introductory and growth stage, Starbucks has just entered the mature stage of its life cycle • The specialty coffee market is expected to grow 7-9% annually over the next few years. A Starbucks Grande coffee has over 4 times the amount of caffeine as Red Bull Now after hearing these facts I want to ask……… with only this information Who thinks the shares are over priced? Who thinks the shares are underpriced? Who thinks the shares are priced just right?

 Specialty Coffee Industry

 Industry Sensitivity
 Industry Revenue & Cycle  Competitive Analysis

 External Analysis
 Porter Five Forces Model Market Estimation

* Prepared by Ji Hyee Jeong

Specialty Coffee Industry
 Specialty Coffee Industry
 Specialty coffee is the term commonly used to refer to "gourmet" or

"premium" coffee. Starbucks is a leading specialty coffee retailer and US one of the best know brand today. 40% Coffee Market Size Others 60% $32Bil

Total $80.76bil

 US Coffee Market & Specialty Coffee Market

The coffee industry is very concentrated at the top and fragmented at the bottom . (Top 50 companies - 70% of the sales) Dunkin-16.1% Starbucks- 32.6% Others - 51.3%

Specialty coffee market =$16Bil

Specialty coffee represents about a 37% volume share but nearly 50% value against the US total. (Starbucks, Caribou coffee) Caribou 2.5%

Starbucks- 62.5%

Others – 35%

http://en.wikipedia.org/wiki/Specialty_coffee http://www.franchisedirect.com/coffeefranchises/coffeefranchiseindustryresearchbusinessreporti/74/220 http://www.scaa.org/PDF/resources/facts-and-figures.pdf

Industry sensitivity
 Cyclic specialty coffee industry
 Specialty coffee industry reflects macroeconomic market situation  Effects of the macroeconomic downturn on the world coffee economy  Consumption move from higher cost to cheaper one so specialty coffee market share can be reduced  Consumer shift form out-of- home to in-home instead of decreasing coffee intake

 Industry Growth & Market trend
 Daily coffee consumption soared by about 7%, moving coffee solidly

ahead of soft drinks (2012 National Coffee Trend, National Coffee Association)  Specialty coffee consumption also grew, moving from 37% of all cups of coffee consumed in the U.S. in 2011 to 54% in 2012. http://magazine.coffeetalk.com/december12-driven-markets/ http://www.vendingmarketwatch.com/news/10746381/us-coffee-consumption-continues-to-rise-single-cup-use-grows http://seekingalpha.com/article/567401-starbucks-leads-coffee-stocks-as-coffee-consumption-passes-soft-drinks http://fletcher.tufts.edu/CEME/publications/~/media/Fletcher/Microsites/CEME/newpdfs/Specialty_Coffee_VCA_by_Hayden_Kwast_08_2010.ashx http://www.ico.org/documents/ed-2059e-economic-crisis.pdf

Industry Revenue & Cycle
$Bil
41,000 46,000

Industry Life Cycle
 Specialty coffee sales are affected by  Industry Life Cycle (Mature stage)  High brand awareness economic status (personal income,  Wide distribution strong economy)  Fierce competition  Porter 5 forces model http://www.pacificedc.org/Library%20Docs/Coffee%20Shop%20Industry%20Snapshot.pdf (US department of commerce, Bureau of Economic Analysis): http://www.bea.gov/ http://smallbusiness.chron.com/product-life-cycle-gourmet-coffee-industry-37334.html

Competitor Analysis
 Caribou Coffee  McDonalds

 Dunkin’...
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