Has Starbucks reached Market Saturation?

The second financial quarter has been good to Starbucks Corp. with an 18 percent increase in net income.  There has also been a 7 percent increase in global same-store sales.  Company representatives have also indicated that it expects to open 1,000 stores this year, up from the previous goal of 800.

 

Of the new stores, 500 units are slated to be opened in the Americas, a region that includes the U.S., Latin America, and Canada.  Currently there are 12,570 units located in the territory – about 100 more than were available during the same quarter last year.  During the economic downturn, Starbucks has closed nearly 1,000 stores in the U.S. which didn’t perform well, but things have obviously turned around.

 

A Look Towards Progress

 

Company chair, Howard Schultz reports that U.S. locations performed “extraordinarily well” last year.  “Any thought of saturation” is premature, and the company believes that it will be able to maintain its plan to open the cited number of units.  Additionally, in Latin American countries such as Brazil where Starbucks currently operates fewer than 100 units, there is plenty of room for growth.

 

China’s Market is Where the Growth Is

 

The area where Starbucks expects the highest rate of growth is China.  Starbucks intends to open 400 units in the China Asia Pacific region this year.  Some store sales increased 20 percent for the quarter for the seventh consecutive time in China where half of the new locations are planned.

 

Increased sales of new products such as the K-Cup packages, Blonde Roasts, and fruit based drinks have helped produce a positive picture.  The chain will be introducing Evolution Fresh juices and a line of energy drinks called Refreshers in the coming months, all of which are designed to increase customer appeal to non-coffee drinkers.

 

Europe’s Market in Decline

 

While Europe has continued to be a challenge for Starbucks, the company continues to focus its efforts on achieving a turnaround.  Nevertheless, the sales increases in the UK and France were not enough to overcome decreases in other areas in the region.

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