Starbucks has steadily grown its beverage revenue over 10 years while expanding its store base. The document analyzes Starbucks' brand strength, adaptability, cost efficiency, and provides a valuation. It finds that Starbucks accurately evaluates trends and executes new initiatives, and allows efficient modification and new endeavors through technology integration. The market slightly overvalues Starbucks, and the group values it at $52 based on conservative projections and a 6.55% WACC.

1. Starbucks Corporation Valuation Project
Group 3:
Christopher Carvounis, Jessica Gibbs, Jerry Hu, Hannah Kiesler,
Tyrone Li, Thomas Rosenstein
0

2. Industry Overview
Brand Strength • Adaptability • Cost Efficiency • Valuation
Source: Statista, entrepreneurshippze.weebly
1

3. • ≈1 billion in beverage revenue growth per year (except for 2008-2011)
• 21,366 stores as of 2014
• Starbucks can grow beverage revenue faster than store openings
$4,904,361
$5,995,945
$7,058,623
$7,891,080
$7,428,696
$8,030,550
$8,775,300
$9,974,625
$11,020,228
$12,006,894
0
5,000
10,000
15,000
20,000
25,000
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
StoresperYear
BeverageRevenue(in'000s)
Years
Beverage Revenue and Store Growth
Starbucks’s beverage revenue has generally grown steadily over 10 years
Brand Strength • Adaptability • Cost Efficiency • Valuation2

4. The market values Starbucks at $57, we value Starbucks at
$52
Aligns initiatives with what Starbucks means to consumers
(continued growth and global expansion)
Starbucks accurately evaluates trends in and executes new
initiatives based on those trends (prod diversification,
revenues)
Allows Starbucks to efficiently modify image and
undertake new endeavors (Integration of tech, supply
chain management, franchising)
Long and short term growth volatility is relatively low,
market slightly overvalues Starbucks, is perhaps a little
too excited about future of company
Brand Strength
Ability to learn and
adapt to serve
consumers
Cost Efficiency
Measures
Valuation
Brand Strength • Adaptability • Cost Efficiency • Valuation3

5. The market values Starbucks at $57, we value Starbucks at
$52
Aligns initiatives with what Starbucks means to consumers
(continued growth and global expansion)
Long and short term growth volatility is relatively low,
market slightly overvalues Starbucks, is perhaps a little
too excited about future of company
Brand Strength
Ability to learn and
adapt to serve
consumers
Cost Efficiency
Measures
Valuation
Brand Strength • Adaptability • Cost Efficiency • Valuation4

6. Brand Strength • Adaptability • Cost Efficiency • Valuation
Every day, we go to work hoping to do two
things: share great coffee with our friends and
help make the world a little better. It was true
when the first Starbucks opened in 1971, and
it’s just as true today… Starbucks is a place for
conversation and a sense of community. A
third place between work and home.
Starbucks’ strong brand centers around creating a
third place
5

7. Brand Strength • Adaptability • Cost Efficiency • Valuation
Brand
Store
Base
Mobile
App
Retail
Packaged
Goods
The “Flywheel Strategy”
• draws the consumer
into the brand
• provides comfort in
familiarity
Operational
efficiency for
company and
consumer
6

8. 0
1
2
3
4
5
6
7
8
9
10
McDonalds Tim
Hortons
Dunkin
Donuts
Panera Starbucks
DownloadSpeed(Mbps)
Speed of wifi compared to
competitors
Starbucks merges its mission with the integration of technology into
the Starbucks experience, promoting store traffic
Brand Strength • Adaptability • Cost Efficiency • Valuation
“The nearest charge is only a
Starbucks away.”
7

9. The market values Starbucks at $57, we value Starbucks at
$52
Starbucks accurately evaluates trends in and executes new
initiatives based on those trends (prod diversification,
revenues)
Long and short term growth volatility is relatively low,
market slightly overvalues Starbucks, is perhaps a little
too excited about future of company
Brand Strength
Ability to learn and
adapt to serve
consumers
Cost Efficiency
Measures
Valuation
Brand Strength • Adaptability • Cost Efficiency • Valuation8

10. Starbucks adapts into new markets to capture consumers changing
preferences
Health and Wellness Expansion of FoodTea Market
Brand Strength • Adaptability • Cost Efficiency • Valuation
• smoothie and juice
brand
•acquired in 2011 for
$30 million
• loose tea and tea brand
•acquired in 2012 for
$620 million
• acquired in 2012 for
$100 million
• increase food
revenues to $4
billion by 2019
9

11. Starbucks capitalizes on consumers alternative beverage preferences to
promote revenues in the evenings
Brand Strength • Adaptability • Cost Efficiency • Valuation
15%
46%
35%
24%15%
17%
35%
13%
Starbucks85% of Total US QSR
Business
Evening
Afternoon
Lunch
Morning
Share of consumer dollars by day part
$6.5
revenue
per glass
10

12. Creation of innovative technology to adapt to consumers habits
in order to predict needs and promote sales
Brand Strength • Adaptability • Cost Efficiency • Valuation
0%
6%
8%
9%
12%
14%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11
Pacific northwest mobile order and pay % of total
sales
nfcworld.comSource: RBC Capital Markets Consumer Panel
11

13. Global Adaptability
Brand Strength • Adaptability • Cost Efficiency • Valuation
Source: cargocollective
12

14. Starbucks is able to learn and adapt to the nature of
communities outside the US
• Synergy with local culture
– Interior Design
– Customized Flavor
– Community Building
Brand Strength • Adaptability • Cost Efficiency • Valuation13

15. Number of international and US Starbucks stores from 2005 to 2014
Source:Starbucks
7,302
8,896
10,684
11,567
11,128 11,131
10,787 11,045
11,457
11,962
2,939
3,544
4,327
5,113 5,507 5,727 6,216
7,021
8,310
9,404
0
5000
10000
15000
20000
25000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Numberofstores
U.S. International
Number of international and United States Starbucks stores from
2005 to 2014 (Continuation from previous slide)
Brand Strength • Adaptability • Cost Efficiency • Valuation14

16. The market values Starbucks at $57, we value Starbucks at
$52
Allows Starbucks to efficiently modify image and
undertake new endeavors (Integration of tech, supply
chain management, franchising)
Long and short term growth volatility is relatively low,
market slightly overvalues Starbucks, is perhaps a little
too excited about future of company
Brand Strength
Ability to learn and
adapt to serve
consumers
Cost Efficiency
Measures
Valuation
Brand Strength • Adaptability • Cost Efficiency • Valuation15

17. Brand Strength • Adaptability • Cost Efficiency • Valuation
Cost of coffee is a volatile and makes up a significant portion of
Starbucks costs
16

18. Starbucks overall cost of goods sold unaffected by market
coffee prices
Brand Strength • Adaptability • Cost Efficiency • Valuation17

19. Establishing joint ventures to reduce the risk of entering foreign
markets
Identify
Potential Local
Partners
• 1995 Starbucks
expands to Japan
with local business
Sazaby League
Joint Venture
• Sazaby League
given exclusive
rights to open
Starbucks stores
Exit or Wholly-
owned
Subsidiary
• 2015 Acquiring
Starbucks Japan
from partner
Sazaby League
Brand Strength • Adaptability • Cost Efficiency • Valuation18

20. 0
5
10
15
20
25
2011 2012 2013 2014 2015 2016 2017 2018 2019
millionsofpeople
Active MSR members projected growth
Brand Strength • Adaptability • Cost Efficiency • Valuation
Utilization of the Starbucks app to create cost efficient and
effective personalized marketing
19

21. The market values Starbucks at $57, we value
Starbucks at $52
Long and short term growth volatility is relatively low,
market slightly overvalues Starbucks, is perhaps a little
too excited about future of company
Brand Strength
Ability to learn and
adapt to serve
consumers
Cost Efficiency
Measures
Valuation
Brand Strength • Adaptability • Cost Efficiency • Valuation20

22. Brand Strength • Adaptability • Cost Efficiency • Valuation
We utilize conservative CAGR projections based on small adjustments historical averages
21

23. Brand Strength • Adaptability • Cost Efficiency • Valuation22

24. We calculate WACC at 6.55%, share price at $51.53, ~10% higher than current
23

25. Brand Strength • Adaptability • Cost Efficiency • Valuation
Projected valuation only slightly more volatile than CAGR inputs
24

26. Total Revenue projections
Total Costs projections
Even in most pessimistic projection, total revenue grows faster than total costs
25

27. The market values Starbucks at $57, we value Starbucks at
$52
Aligns initiatives with what Starbucks means to consumers
(continued growth and global expansion)
Starbucks accurately evaluates trends in and executes new
initiatives based on those trends (prod diversification,
revenues)
Allows Starbucks to efficiently modify image and
undertake new endeavors (Integration of tech, supply
chain management, franchising)
Long and short term growth volatility is relatively low,
market slightly overvalues Starbucks, is perhaps a little
too excited about future of company
Brand Strength
Ability to learn and
adapt to serve
consumers
Cost Efficiency
Measures
Valuation
Brand Strength • Adaptability • Cost Efficiency • Valuation26

28. Appendix
Brand
Title slide
28. Starbucks Mental Map
29. Awareness of Starbucks in seven countries
30. Company and Competitor Positioning Strategy
Revenue
31. Coffee retail sales share, by type
32. Projected per capita coffee consumption
33. Revenue of the coffee and snack shops industry
34. Revenue per employee in the U.S. coffee and snack shops industry
35. Revenue distribution by product type
36. Retail sales distribution COS stores worldwide from 2005 to 2014
37. Projected Revenue Distribution by Product Type
38. Share of Consumer Dollar by Daypart
39. Revenue Driver: Same-Store Sales Growth
40. Same-store Sales in different global market
Company Initiatives
41. Rev, COGS, Depreciation, SG&A wrt company initiatives
42. Rev, COGS, Depreciation, SG&A wrt M&A of new brands
43. Rev, COGS, Depreciation, SG&A wrt international expansion
44. Projected Net Revenue and COGS growth to 2018
45. Xxx
Cost
46. lower volatility when coffee prices are high versus coffee prices low
47. lower profit margins due to premium expenses
48. Average price of coffee worldwide by type of coffee
Market
49. # of Starbucks stores worldwide
50. Coffee production worldwide
51. Coffee export volumes worldwide by leading countries
52. Market Share for K-Cups
53. Global smartphone shipments
54. Competition SWOT
Technology:
55. Pacific Northwest growing in percentage of mobile sales from
mobile ordering
56. My Starbucks Rewards Policy
57. Increase of My Starbucks Rewards usage
58. Starbucks Loyalty Members - Historical
59. Increase in Ticket Sales
60. Technology-Mobile Contribution to Increase in Ticket Sales
61. technology -Adaption of technology to stimulate revenue growth
Other:
62. DCF- Share price sensitivity to WACC and TGR volatility
63. Supply Chain Process as of Sept. 2013
64. Farmer’s support centers(C.A.F.E. Practices)
65. Costs of alternative internet advertising
66. Globalization
67. Starbucks Perception in different countries
27

29. Starbucks Mental Map
28

30. Brand awareness of Starbucks Corporation in 2014 in seven countries
29

31. Company and Competitor Positioning Strategy
30

32. Further information regarding this statistic can be found on page 68.
Coffee retail sales share in the United States in 2011 and 2013, by type
Note: United States
Source: Rabobank; Smucker's; ID 286949
47%
6%
31%
11%
5%
36%
26% 26%
9%
3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Roast and ground coffee K-Cups Premium Instant Other
Retailsalesshare
2011 2013*
31

33. Further information regarding this statistic can be found on page 84.
Projected per capita coffee consumption in the United States from 2012
to 2016 (in pounds)
Note: United States
Source: IBISWorld; ID 250155
7.4 7.5 7.6 7.7 7.6
0
1
2
3
4
5
6
7
8
9
2012 2013 2014 2015 2016
Pounds(lb)
32

34. Revenue of the coffee and snack shops industry in the United States from
2002 to 2016 (in billion U.S. dollars)*
Source:IBISWorld;ID 196570
Note:United States; 2002 to 2016
16.65
17.32
18.93
22.28
24.08
25.58
26.46
24.74
25.52
26.53
27.84
28.84
30.24
31.12
32.46
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Revenue(inbillionU.S.dollars)
Further information regarding this statistic can be found onpage 8.
33

35. Revenue per employee in the U.S. coffee and snack shops industry from
2002 to 2016 (in U.S. dollars)*
Source: IBISWorld; ID 196688
Note: United States; 2002 to 2016
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Revenueperemployee(inU.S.dollars)
Further information regarding this statistic can be found on page 8.
34

36. Revenue distribution of Starbucks from 2009 to 2014, by product type (in
billion U.S. dollars)*
Source: Starbucks; ID 219513
Note: Worldwide; 2009 to 2014
6.24
6.75
7.22
7.84
8.59
9.46
1.68
1.88
2.01
2.09
2.42
2.51
0.97
1.13
1.45
2
2.17
2.37
0.89
0.95
1.02
1.37
1.71
2.11
0
2
4
6
8
10
12
14
16
18
2009 2010 2011 2012 2013 2014
RevenueinbillionU.S.dollars
Beverage Food Packaged and single-serve coffees and teas Other**
Further information regarding this statistic can be found on page 8.
35

37. Retail sales distribution of company-operated Starbucks stores
worldwide from 2005 to 2014*
Source: Starbucks; ID 218397
Note: Worldwide; 2005 to 2014; Fiscal year ended September 29, 2014
77% 77%
75% 76% 76% 75% 75% 75% 74% 73%
15% 15% 17% 17% 18% 19% 19% 19% 20%
18%
4% 3% 3% 3% 3% 4% 4% 4% 3%
4%
4% 5% 5% 4% 3% 2% 2% 2% 3% 5%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Shareofsales
Beverages Food Packaged and single-serve coffees and teas Other
Further information regarding this statistic can be found on page 8.
36

38. Projected Revenue Distribution by Product Type
0.
10.
20.
30.
40.
50.
60.
70.
80.
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
billionsofU.S.dollars
Projected Revenue Distribution by Product Type
Beverage Food Single Serve Coffee and Tea Other**
37

39. Share of Consumer Dollar Spent by Daypart
38

40. Same-Store Sales Growth
39

41. Same-store Sales in different global market
40

42. Projected Net Revenue and COGS growth to 2018
0
5,000
10,000
15,000
20,000
25,000
30,000
U.S.dollarsinthousands
41

43. Growth of Revenue, COGS, Depreciation, SG&A with respect to company
initiatives
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USdollarsinthousands
Comparision of revenue, COGS, depreciation, G&A
Wifi
introduction
Loyalty
program
App Launch
Free wifi
Wireless
charging +
Fastest
wifi
Mobile ordering
and pay
42

44. Growth of Revenue, COGS, Depreciation, SG&A with respect to
acquisition and launches of new brands
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USdollarsinthousands
Comparision of revenue, COGS, depreciation, G&A
Seattle’s Best
Coffee
Tazo LLC; Pasqua Inc.
Ethos brand LLC
Coffee
Equipment LLC
Evolution Fresh
La Boulange
Teavana
Starbucks Evenings
Expansion of
lunch menu
43

45. Growth of Revenue, COGS, Depreciation, SG&A with respect to
international expansion
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USdollarsinthousands
Comparison of revenue, COGS, depreciation, G&A
Intro China
100% equity in
Hawaii + Puerto
100% equity in
Beijing and
Tianjin
100% equity
France +
Brazil
Starbucks
Japan
First
Store in
Japan
1996
100% equity in S.
China + Chile
44

46. Word
$100 billion coffee, tea, and ready-to-drink
beverage market globally
“How do we reach more consumers across a
larger terrain here in the U.S.?” Washington
says. “We meet consumers where they are.”
45

47. Starbucks shows lower volatility when coffee prices are high
versus coffee prices low
46

48. Starbucks displays lower profit margins due to premium
expenses
47

49. Further information regarding this statistic can be found on page 63.
Average price of coffee worldwide from 1998 to 2014, by type of coffee (in
U.S. dollars per pound)
Note: Worldwide
Source: ICO; ID 250186
0
0.5
1
1.5
2
2.5
3
1998 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PriceinU.S.dollarsperpound
Colombian Mild Arabicas Other Mild Arabicas Brazilian Natural Arabicas Robustas
48

50. Number of Starbucks stores worldwide from 2003 to 2014
Source: Starbucks; ID 266465
Note: Worldwide; 2003 to 2014; Fiscal years end on the Sunday closest to September 30.
7,225
8,569
10,241
12,440
15,011
16,680 16,635 16,858 17,003
18,066
19,767
21,366
0
5000
10000
15000
20000
25000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Numberofstores
Further information regarding this statistic can be found on page 8.
49

51. Further information regarding this statistic can be found on page 61.
Coffee production worldwide from 2003 to 2013 (in million bags*)
Note: Worldwide; 2003 to 2014
Source: ICO; ID 263311
103.91
115.56
111.25
128.91
116.61
128.64
123.03
133.63
136.25
147.5 146.77
141.62
0
20
40
60
80
100
120
140
160
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Productioninmillionbags
50

52. Further information regarding this statistic can be found on page 64.
Coffee export volumes worldwide in November 2014, by leading countries
(in 60-kilo sacks)
Note: Worldwide
Source: ICO; ID 268135
3,015,152
1,400,000
1,018,987
330,000
250,000
245,000
219,948
150,000
130,000
105,447
0 500000 1000000 1500000 2000000 2500000 3000000 3500000
Brazil
Vietnam
Columbia
Indonesia
Ethiopia
India
Uganda
Mexico
Cote d'Ivoire
Honduras
Export volume in 60 kilo sacks
51

53. Market Share Breakdown for K-Cups
52

54. Global smartphone shipments from 2009 to 2014
173.5
304.7
494.5
725.3
1,018.7
1,300.4
0.
200.
400.
600.
800.
1,000.
1,200.
1,400.
2009 2010 2011 2012 2013 2014
shipmentinmillionunits
Global smartphone shipments from 2009 to 2014 (in
millions)
Worldwide; IDC
53

55. Starbucks in favorable market position with opportunities for
growth, although it faces intense competition
54

56. 0%
35.10%
40.00%
51.10% 53.10%
68.70%
78.60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11
Pacific Northwest mobile ordering % of
mobile sales
Pacific Northwest growing in percentage of mobile sales from
mobile ordering
55

57. My Starbucks Rewards Policy
56

58. Increase of My Starbucks Rewards usage
57

59. Starbucks Loyalty Members - Historical
58

60. Active My Starbucks Rewards Members(millions)
59

61. Mobile Contribution to Increase in Ticket Sales
60

62. 0
5
10
15
20
25
2011 2012 2013 2014 2015 2016 2017 2018 2019
millionsofpeople
Active MSR members projected growth
20%
Adaption of technology to stimulate revenue growth
61

63. Share price sensitivity to WACC and TGR volatility
62

64. Supply Chain Process as of Sept. 2013
Supply Chain Process as of Sept. 2013
Brand Strength • Adaptability • Cost Efficiency • Valuation63

65. Farmer’s support centers(C.A.F.E. Practices)
• provide local farmers with
resources and expertise
• lower farmers’ cost of
production
• Improve coffee quality
• ethically source 100 percent of
its coffee by 2015
Source: Starbucks.com Brand Strength • Adaptability • Cost Efficiency • Valuation64

66. Costs of alternative internet advertising
Trending on $80,000
Featured article on $20,000
Video on $.10 - $.30 per view
approx. 6000 views/video
= $1200 per video
Starbucks App:
$150,000 fixed development costs,
negligible variable costs
10.3M current users = approx. $69 per user cost
Becomes cheaper as user base grows and fixed costs are spread out
65

67. Globalization
Brand Strength • Adaptability • Cost Efficiency • Valuation66

68. Starbucks Perception in different countries:
Brand Strength • Adaptability • Cost Efficiency • Valuation67