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Permalink Reply by Alun Evans on February 16, 2010 at 9:03pm

Thanks for the posting Jason. For those of us living outside of the US, and I suspect for most of the specialty coffee guys and girls in the the States as well, this kind of partnership and the comments of brand compatability say volumes for the customer targeting of Sbux. Its all very well for a burger company to try and steal business from a coffee roaster (although doing so succesfully I reckon tells a story of that companies customer base), but for that company to be obsessively trying to come back at the Burger Company through QSR strategic alliances seems odd to me. I guess at the end of the day its purely a volume equation for the coffee company

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Permalink Reply by Mike Sabol on February 16, 2010 at 9:21pm

I dunno. I think *$ might be getting itself trimmed up for a buyout. They are shedding a lot of internal weight that will make them look leaner than operating stores actually allows for (like doing a water diet before a date). They are also doing a big franchising push, i.e. diversifying their revenue stream. Franschise and partnerships have a much higher margin, as well. I think the BK thing is just more evidence that the founders and powers at the jolly green giant are looking for an exit strategy. I wouldn't be supprised to see them bought by somebody like Nestle, Pepsi, or RJM Nabisco in the next 18mo.

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Permalink Reply by Alun Evans on February 16, 2010 at 9:31pm

Even more interesting. Here in asia we are kind of well removed from retail reality in the USA. I remember many years ago visiting the US and being shocked at the shabby and (dare i say it) ratty appearance of KFC stores in the States. At the time I was with Pepsico which prior to Yumbrands was running the stores. In NZ by contrast the stores were clean and vibrant.

I have for a longtime been seeing *$ moving away from concentrating on the US and pushing resources into the sub-continent and Asia...do you think a US sellout alone would be a possibility, while the company maintains the International rights?

Mike Sabol said:

I dunno. I think *$ might be getting itself trimmed up for a buyout. They are shedding a lot of internal weight that will make them look leaner than operating stores actually allows for (like doing a water diet before a date). They are also doing a big franchising push, i.e. diversifying their revenue stream. Franschise and partnerships have a much higher margin, as well. I think the BK thing is just more evidence that the founders and powers at the jolly green giant are looking for an exit strategy. I wouldn't be supprised to see them bought by somebody like Nestle, Pepsi, or RJM Nabisco in the next 18mo.

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Permalink Reply by Mike Sabol on February 16, 2010 at 9:51pm

Operating stores is difficult and a capital drain. I don't think they want to do it anymore. They are gutting the internal structure that supports their company owned stores while very publicly building "brand image", launching new products like the freeze dried coffee, and anouncing big partnerships with companies like BK. They are breathing life into the cadre of other brands they own, like SBC, and warming up the franshise engines. Their international growth has always been mediated through joint venture/regional partners anyway. I'm not sure how many company owned non-north american stores there even are. The only thing that company is going to have left will be its international brand recognition which is useless, or worse, when you care about offering customers great coffee, but is very attractive to one of those giant international brand trusts, like RJR or Nestle. I would imagine that if a big fish is going to swallow it, it will swallow it whole.

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Permalink Reply by Alun Evans on February 16, 2010 at 10:01pm

interesting. I would say that for sure the partners they have internationally that I know of are first, and foremost, businessmen and a distant second truly coffee orrientated. Meaning you might be right- It could be that (say) Nestle or Kraft graps the entire business- the JV partners probably would buy into that. Watch this space I guess.

Mike Sabol said:

Operating stores is difficult and a capital drain. I don't think they want to do it anymore. They are gutting the internal structure that supports their company owned stores while very publicly building "brand image", launching new products like the freeze dried coffee, and anouncing big partnerships with companies like BK. They are breathing life into the cadre of other brands they own, like SBC, and warming up the franshise engines. Their international growth has always been mediated through joint venture/regional partners anyway. I'm not sure how many company owned non-north american stores there even are. The only thing that company is going to have left will be its international brand recognition which is useless, or worse, when you care about offering customers great coffee, but is very attractive to one of those giant international brand trusts, like RJR or Nestle. I would imagine that if a big fish is going to swallow it, it will swallow it whole.

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Permalink Reply by Jeremy Perrine on February 17, 2010 at 4:25am

Being a former Licensed Store Manager (Licensed Stores are those that are owned by other companies, i.e. HMS Host, Target, Kroger, BassPro, Marriott, etc), I saw first hand there push to streamline both branches to be similar. They wanted my store to be just like all of the Company Operated. Of course, I was in an airport with HMS Host, so I had some wiggle room, but only with what bottled drinks and merch I could offer.

They have definitely pushed the Licensed Stores forward in regards to branding. Some of the best SBux's, in my opinion, are Licensed Stores, I would prefer to go into one of these over a Company Operated any day.

Also keep in mind that while SBux does have a large Licensed Stores out there, they still employ District Managers. These are Starbucks employees whose sole responsbility is to make sure that each Licensed Store is operating up to code with the Corporate standards.

They do indeed have the internal structure that would allow a company to step right in and continue both branches of operations with little to no hiccups.

In short, I agree. They could be sold easily. Whether that is only the Company Operated, only the Licensed Store, or both is yet to be determined.

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Permalink Reply by Demian Luper on February 17, 2010 at 11:14am

I'm surprised that no one sees this is as a step forward for the US consumer. Sure, we all know the score: fast food bad! starbucks bad! But, if this means that the quality of the coffee at Burger King will improve, isn't that a win?

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