Starbucks Expands in India - Analyst Blog

By Zacks | February 07, 2013 AAA

Starbucks Corporation (SBUX) recently announced the opening of yet another Starbucks store in the lucrative Indian market, this time in the capital city of New Delhi in a joint venture with Tata Global Beverages Limited. The store, a first in New Delhi, is located in Connaught Place and will be operated by the joint venture, Tata Starbucks Limited, and branded as Starbucks Coffee - "A Tata Alliance". The menu includes a wide range of Starbucks signature coffee, Tata/ Tazo teas and exclusive food offerings. Moreover, the store will offer free Wi-Fi and a specially designed, India-specific Starbucks Card.

Starbucks entered the Indian market in October last year, with its first 3 store openings in Mumbai. Late last month, the company opened its first store in another emerging market, Vietnam, in partnership with Hong Kong Maxim's Group. This store opening makes Vietnam the 12th market to boast a Starbucks store in the China Asia-Pacific (CAP) region.

The Starbucks brand is gaining popularity with consumers across the Asia-Pacific region as the company continuously expands its store base outside the U.S.  Management believes that the CAP region, which has grown 33% (in terms of revenue) since 2010, will drive more meaningful business growth over the next 5 years. Specifically, Starbucks' business in China is rapidly growing and the region is expected to become the company's second-largest market by 2014. The company is looking to take the store count in this region to 1,500 in 70 cities by 2015.

The CAP segment is expected to have 4,000 stores by the end of 2013, including 1,000 in Mainland China, 1,000 in Japan and 500 in Korea.

Starbucks carries a Zacks Rank #3 (Hold). Other better performing restaurant companies worth considering include Krispy Kreme Doughnuts, Inc. (KKD), The Cheesecake Factory Incorporated (CAKE), and Burger King Worldwide, Inc (BKW), all of which carry a Zacks Rank #2 (Buy).

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