Starbucks’ (SBUX) short-term and medium-term catalysts are quite well-known; increased food revenue, growth in Asia and mobile payments definitely fit into the latter category.
But the coffee retailer has some longer-term catalysts that have not received nearly as much publicity, and thus are not yet properly priced into Starbucks stock.
As a result, SBUX is an attractive proposition for investors in it for the long-term.
For example, many investors probably don’t know that the coffee chain added beer and wine to small number of stores back in 2010, and is now adding five more stores featuring the Starbucks Evenings menu, ratcheting up the total to 70 stores.
As of August, customers could order beer, wine and the sort of dinner appetizers you’d expect from an upscale restaurant:
“The drinks are served alongside dishes that are not the usual Starbucks fare. Small plates include truffle mac & cheese, chicken skewers, artichoke & goat cheese flatbread, meat balls with tomato basil sauce, bacon-wrapped dates, a cheese plate and truffle popcorn.”
By 2020, Starbucks hopes to equip 2,000 of its 12,000 stores in the U.S. with its evening offerings.
A Driver of Starbucks Stock
Starbuck’s new evening repertoire could be a game changer for Starbucks: Howard Schultz’ vision for Starbucks has always been one of a “neighborhood gathering place” where people can meet, whether for work purposes or just to hangout, and Starbucks Evenings opens the potential for more store traffic during what is typically the tail end of the day for business.
Also largely overlooked has been the huge potential of Starbucks’ tea business, Teavana. The global tea market is expected to be worth more than $38 billion by 2016, and the U.S. imported $10.8 billion of tea in 2014. The Tea Association of the U.S.A. predicts that tea sales in the U.S. will double over the next five years.
Of course, tea is hugely popular in Asia, but Starbucks hasn’t yet gotten around to rolling out Teavana to China, Japan and other Asian countries. That process is slated to start next year. If Teavana is well-received in those countries, Starbucks’ sales in Asia could really soar.
In the U.S., Starbucks is promoting Teavana’s iced teas much more than its hot offerings, according to World Tea News. Noting that 85% of Americans name iced tea as a favorite drink, the publication says Starbucks made the right call. Additionally, iced tea is becoming a more ubiquitous beverage as Americans ditch sodas and high calorie juices.
On its last earnings conference call, Starbucks reported that sales of iced beverages, including Teavana Shaken Iced tea, jumped 20% in its fourth quarter vs. the same period a year earlier. Iced tea is clearly having a significant positive impact on Starbucks.
The delivery program Starbucks is launching in New York and Seattle should also be a huge boon to SBUX stock.
Considering the tens of millions of people in the U.S. who work in offices and would love to treat themselves to Starbucks coffee during the work day, but don’t have the time (read: patience) to drive to the local store and wait in line, delivery could eventually become a real needle mover for the coffee giant.
Alcohol, tea and delivery are all poised to be hugely successful initiatives for Starbucks in a couple of years, but they aren’t priced into Starbucks stock yet. As a result, Starbucks stock is very attractive for long-term investors.
As of this writing, Larry Ramer did not hold a position in any of the aforementioned securities.
