AGB 2020.1 - Starbucks (SBUX)

Best in Class Store Level ROI

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Starbucks

What if we told you that you could own a store that consistently produced 30+% EBITDA margins and revenues increased 2%-5% per year due to higher volumes and prices? What if we also told you that it didn’t matter that there was an exact replica of your store being built 3 blocks away because your loyal customer base returned to your store daily to purchase your product that had almost 70% gross margins? You’d probably say that “it’s too good to be true.” Then when we showed you the data, you’d probably say “let’s build as many of these stores as possible.”

Espresso bar served premium coffee is part addictive legal stimulant, part low ticket luxury and part status signal. This socially acceptable habit was popularized in the U.S. by Starbucks after Howard Schultz (then marketing director) visited Italy in the 1980s. Ever since then, Starbucks has rapidly expanded throughout the world to over 18,000 locations in …