Posts Tagged ‘china’

Has Starbucks reached Market Saturation?

May 29, 2012

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.

McDonalds to Be Investigated by Chinese Food and Drug Administration

August 5, 2010

Leave it to the Chinese to begin an investigation of an American company. After the scandal a few years ago with tainted baby formula and dog food, China started taking things very seriously when it comes to food safety and they have now opened an investigation in food practices of McDonalds restaurants operating in the country.

The investigation surrounds two chemical compounds that are used in McDonald’s McNuggets. The story was first broken by the American CNN cable news channel, explaining how McNuggets include two chemicals, one, tertiary butylhydroquinone, or tBHQ is based on petroleum (yes, the same stuff you fill your car up with at the gas station) and is used as a preservative for the chicken treats. The other chemical in question, dimethylpolysiloxane is commonly used in the children’s toy Silly Putty. It is an antifoaming agent which is also commonly found in women’s cosmetics such as facial cream and mascara.

While McDonalds does not deny that the chemicals are present in their Chicken McNuggets, they do say that in the tiny amounts that they are used, the chemicals are completely harmless. Both the United States and Chinese Food and Drug Administration do allow the chemicals in certain amounts (and the chemicals are used in American Chicken McNuggets as well), however the Chinese Food and Drug Administration, unlike their American counterparts have called for an official investigation into the food safety of the McDonalds staple food.

The chemicals are typically permitted to be present in amounts of 10 mg per kilogram for the dimethylpolysiloxane and 0.2 grams per kilogram for tBHQ.

A McDonalds spokesman speaking to Bloomberg News said that the additives were well within the legal limits and that they were perfectly harmless. According to the same Bloomberg News report, McDonalds has ambitious plans for China, having already opened 1,146 stores with plans for 2,000 stores by the year 2013.

Shares of McDonalds Corporation are up more than three points since the beginning of July indicating that investors are clearly not concerned by this latest minor controversy.