Starbucks S Caribous

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Starbucks Corporation vs. Caribou Coffee
Company Analysis

Rusty Shackleford

Executive Summary
The following report details the background and financial position, in regards to receiving credit, of Starbucks Corporation and Caribou Coffee. Starbucks is the largest roaster and retailer of specialty coffee in the world while Caribou is the second largest premium coffeehouse operator in the United States. Both companies offer their coffee product in licensed retail stores and in other commercial segments including grocery stores. Each company has branched out from just coffee by adding items like bottled drinks, teas, espressos and cappuccinos and a line of baked goods to their menus. Each company faces similar risks inherent to the coffee industry. These risks include fluctuating coffee bean prices, the U.S. economy and various foreign economies. Additional risks to Caribou include the inability to circumvent changes in interest rates or the price of supplies and charter provisions which may prevent or delay changes in management. Despite increasing current ratios, both companies are increasing liquidity risk by not having a standard 2:1 ratio. Caribou looks to have more liquidity based on cash to current assets and cash to current liability ratios but has seen a rise in days’ sales in receivables. Caribou also converts inventory to cash quicker than Starbucks. However, Starbucks is able to pay back obligations 3 days faster than Caribou. Though Caribou appears to be more liquid, there is a large gap in working capital which needs to be noted. Based on cash flow ratio, Starbucks seems less risky to lend credit to because of a higher ratio. The debt to equity ratio makes Starbucks appear less likely to default on debt financing and Starbucks’ times interest earned ratio far exceeds that of Caribou’s. Starbucks also fairs better in meeting obligations using only cash from operations and has a greater return on net operating assets.

Analysis Overview
Company Descriptions
Formed in 1985, Starbucks is the largest roaster and retailer of specialty coffee in the world. They purchase and roast high-quality whole bean coffees and sell them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of complementary food items, a selection of premium teas, and beverage-related accessories and equipment, primarily through company-operated retail stores. Starbucks also sells coffee and tea products and licenses its trademark through other channels such as licensed retail stores. Starbucks also produces and sells a variety of ready-to-drink beverages. Founded in 1992, Caribou Coffee is the second largest premium coffeehouse operator in the United States based on the number of coffeehouses operated. Their coffees are also available within the commercial segment through grocery stores, mass merchandisers, club stores, office coffee and foodservice providers, hotels, entertainment venues and e-commerce channels.

Business Segments
Starbucks operates in three business segments: United States, International, and Global Consumer Products Group (CPG). Caribou also has 3 business segments but they are significantly different from Starbucks. Their business segments are retail, commercial, and franchise. Therefore we will not be comparing business segments.

Products
In addition to brewed coffees, espressos and cappuccinos, Starbucks also offers bottled drinks, chocolate drinks, teas, and smoothies. Starbucks also have an extensive variety of bakery items, fruit and snack plates, hot breakfast, salads, sandwiches, panini and wraps, ice cream and yogurt parfaits. Similar to Starbucks, Caribou offers espressos, lattes, and cappuccinos. Additionally, Caribou offers a variety of iced coffees, coolers, smoothies, hot chocolate and iced teas. Caribou also offers bakery items including hand-crafted oatmeal, muffins, brownies, breads, coffee cake, scones, cookies, bagels,...
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