Friday, December 21, 2007

Starbucks (SBUX)

If caffeine is the best selling drug in the world then Starbucks is the biggest drug dealer. With over 15,000 "lounges" does Starbucks have room to continue its impressive growth or have they over expanded.

Last weekend I was out shopping with my wife at a busy intersection and noticed there were three Starbucks within one block. Starbucks are everywhere and they have not come out with anything new or innovative in a long time. McDonald's has had a lot of success with there new line of premium coffees and posses a real threat to the Starbucks experience. Why would someone wait in line for 10 minutes to pay twice as much for the same product? With the new competition and over expansion Starbucks may have an uphill battle in front of them.

First, Starbucks is selling 14 times as much coffee per store as McDonald's. Starbucks also offers an atmosphere that McDonald's can not match. Second, Starbucks has room to expand internationally especially in Asian markets where coffee is popular. Finally, caffeine is addicting and in this fast paced world in which we live people are going to need there coffee and Starbucks will be happy to supply.

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