This Could Send SBUX Stock Soaring
Starbucks Corporation (NASDAQ:SBUX) could be heading for new heights. The iconic coffee company, with its 22,519 locations in 67 different countries, is on the brink of closing of the agreements to open its first Italian store, starting in Milan, at the beginning of 2016. What does this mean for SBUX stockholders? (Source: “Starbucks Set to Rock Italy’s Cafe Culture,” ABC News, last accessed October 26, 2015.)
Seattle’s second business colossus headed by Howard Schulz (with its $9.0 billion dollars in annual revenue) has decided to export the frappuccino to the world capital of espresso coffee and cappuccino where locals do not drink any coffee beverage with milk after 10:00 a.m.
Indeed, the fastest way to show an Italian you’ve never been to Italy is to order a cappuccino in a restaurant after dinner or lunch. There is no word on whether Starbucks will be offering muffins, bagels, American-style coffee and brownies; but if Italian customers do not warm up to those items, they will certainly appreciate the free Wi-Fi. While the company’s revenue can expect minimal revenue growth, SBUX stock should gain considerably. Italy is to coffee what stocks are to Wall Street and Starbucks stock will gain many “bucks” from its Italian expansion.
Where Starbucks can really draw business is with tourists and expats, who might not be familiar with the best-priced and best-tasting coffee providers in Milan, where there are a myriad of bars serving espresso, cappuccino, and all relevant accoutrements like croissants, or cornetto. Italians most commonly enjoy an espresso or cappuccino with a croissant for breakfast.
After 20 years of trying, it appears as if Starbucks will be entering the Italian market thanks to Antonio Percassi, a former soccer player. Percassi runs the Percassi Group, which manages a number of foreign brands such as Zara, Polo Ralph Lauren and Victoria’s Secret, with limited presence in the Italian market. (Source: “Starbucks in talks to open stores in Italy,” CNBC, Oct. 15, 2015.)
Promotional campaigns, employee training, joint ventures, and international marketing of the multinational based in Seattle are constantly analyzed and studied along with the best business and marketing practices. SBUX stock has already been trading at record highs, climbing steadily from about $40.00 per share to $60.00 per share in just 12 months. Italy can help get Starbucks’ stock reach new heights even faster.
This Could Send SBUX Stock Soaring
Starbucks was founded in 1971 in Seattle where three friends (two teachers and a writer) decided to open their first store. Starbucks has earned its success thanks to Howard Schultz but also to Italy in some way.
It was in 1983, in fact, during a trip to Italy, that Schultz came up with the idea of introducing Italian coffee to America. (Source: Stephan Faris, “Grounds Zero: A Starbucks-Free Italy,” Bloomberg Business, Feb. 9, 2012.) Not only did Shultz adopt the coffee beverage, he noticed the coffee culture, which blends good flavors with social interaction and reading (people reading morning papers and sipping espresso in bars remains a popular morning sight in Italian cities).
Today, the U.S. company has over 22,000 stores in 67 countries worldwide on all continents. But no Italian stores. It has become a popular meeting place and a cultural symbol of urban development whered the target is distributed mainly in large cities. Starbucks, according to the founder’s own wishes, has been absent from Italy. Therefore, the Italian debut is a big moment for Starbucks and Starbucks stock, which should get a caffeine-like jolt from the exposure.
From the beginning, in fact, Howard Schultz noticed that the Starbucks model in style, with its products, materials, and spaces did not fit well with the habits of Italians and of the coffee culture that is more entrenched there than in any other country.
For years, Schultz has resisted opening in Italy. He may have felt like Tim Cook, current Apple CEO, when the time came to replace Steve Jobs. This was surely a daunting task; one that had shareholders on edge. Likewise, Starbucks shareholders may also have been a little weary of entering the Italian market. However, it seems the Seattle coffee brewer is ready now while the CEO and the company’s shareholders have nothing more to fear about the performance of Starbucks stock.
The Future of Starbucks
Many times there have been rumors about a possible change of course that would bring Starbucks’ green siren to Italy, having always proved unfounded. Now it seems this will happen.
According to some Italian newspapers, including the authoritative Corriere della Sera, Antonio Percassi is about to make this happen. More importantly, Starbucks’ Italian debut will reiterate the very points that have made it an icon around the world. Italians are notoriously proud of their food traditions and try non-Italian foods with skepticism. To quote Frank Sinatra, if you can make it there (i.e. Italy), you can make it anywhere – when it comes to food. This is not usually the case for shares and bonds, but in the case of Starbucks stock, Italy will prove to be bountiful and beautiful.
Italians insist espresso coffee is better than the American coffee they expect to find at Starbucks. Whether or not that’s true, it’s not the point. American coffee is a different product altogether and Starbucks should approach the Italian market as a way to introduce the “Americano” to Italians rather than offer them a better espresso.
American coffee is different from espresso. It helps to keep you warm and comfortable like tea, it is more relaxing because you sip it slowly, and it is perfect for a good chat with a friend or a date. An espresso, as the name says, is express. It is a quick shot of caffeine often drank standing at the counter rather than seated at a table.
Here’s the Bottom Line for Starbucks Stockholders
Starbucks also has much to teach Italians from a business perspective. Free Wi-Fi, a variety of menu items, and the promise of a pleasant break with friends or colleagues. Something many Italian bars are less able to offer as so much of the consuming is done standing up.
With the World Expo ( dedicated to food) now taking place in Milan, Starbucks’ timing could not be better. Starbucks will be able to use its elusive Italian presence as a major achievement to the benefit of the business and Starbucks shareholders.