Latest news with #RachelRuggeri
Yahoo
2 days ago
- Business
- Yahoo
Starbucks is testing a new banana-flavored protein cold foam
Starbucks is piloting a new menu item that will give people a boost of protein with their morning latte. The coffee chain is testing a new protein cold foam at five locations across the U.S., CNN reported. The foam is banana-flavored and paired with the coffee chain's iced latte beverage, a Starbucks spokesperson confirmed with CBS MoneyWatch. Protein drinks and snacks have ballooned in popularity in recent years — a trend celebrities like Khloé Kardashian are looking to cash in on with products like Khloud, a protein popcorn. Protein shakes are now a $6 billion sector, according to Beverage Digest. Starbuck's foray into protein beverages is part of a larger push to reimagine its menu. The company, according to its website, is piloting an array of new products at select U.S. locations known as the Starting Five. Current products being tested include a Strato Frappuccino and croissants baked in-store. The company says it will test these food and beverage options through its Starting Five program before launching them at the national level. To make way for new menu items, Starbucks will pare down its food and beverage offerings by 30% by the end of Fiscal Year 2025. "By simplifying our menu, we're helping to create a more intentional, thoughtful experience for our customers — one where every drink is handcrafted with precision and care," the company posted online. The menu redesign comes at a time of financial tumult for the coffee chain. Sales remained relatively flat through 2024 and the start of 2025. "Our results do not reflect the strength of our brand," said Rachel Ruggeri, chief financial officer in the company's 2024 Fiscal Year results. In an effort to boost sales and lure people back to its retail locations, CEO Brian Niccol unveiled the "Back to Starbucks" restructuring plan in September 2024. The ongoing initiative involves a series of upgrades to its operations and appearance — such as a new dress code for baristas that highlights the the coffee chain's "iconic green apron." An accused woman skips her pedicure, kills her ex-husband LAPD chief speaks out about deployment of military forces to anti-ICE protests Sneak peek: The Day My Mother Vanished
Zawya
25-02-2025
- Business
- Zawya
KKR, Fountainvest and PAG among those eyeing Starbucks China stake, sources say
HONG KONG - KKR & Co, Fountainvest Partners and PAG are among buyout firms interested in acquiring a stake in Starbucks' China business, four sources said, as the U.S. coffee chain looks to revive flagging sales in its second-largest market. Chinese companies, including state-owned conglomerate China Resources Holdings and food delivery giant Meituan, have also been approached as potential buyers, said one of the sources with knowledge of the matter. Starbucks' executive vice president and chief financial officer, Rachel Ruggeri, is expected to be among senior company executives visiting China in the coming weeks to hold sale talks, said two of the four sources. All the sources spoke on condition of anonymity as the information is not public yet. The size of the stake to be sold in Starbucks' China business has not been determined and would be subject to negotiations, the sources said. The names of the interested bidders have not been previously reported. The Seattle-based company would likely prefer a franchisee deal with a strategic partner as part of a stake sale plan, said two of the sources. In a franchisee deal, Starbucks China would be valued at more than $1 billion, they added. KKR, PAG and China Resources declined to comment, while Fountainvest and Meituan did not respond. The talks come as Starbucks CEO Brian Niccol, who took the top job at the coffee chain in August, faces a daunting task of steering the company back to growth amid falling demand in the U.S. and China as well as a decline in its share price. Starbucks said on Monday it would eliminate 1,100 corporate roles as Niccol's "Back to Starbucks" plan focuses on streamlining business through job cuts and by improving customer experience at its U.S. stores. In China, home to more than a fifth of all Starbucks stores, the chain is dealing with a sluggish economic growth and stiff competition from local brands such as Luckin Coffee, which has gained market share with cheaper products and a wider coverage in lower-tier cities. Starbucks has been in informal talks with several private equity firms and companies since the second half of 2024 about strategic options for its China business, the sources said. A Starbucks spokesperson declined to confirm the content of the story and referred Reuters request for comment to Niccol's remarks on China at the earnings call in January, after his first market visit to China. Niccol said at the time that he saw several near-term changes Starbucks could make to strengthen its business while continuing to explore strategic partnerships to grow in China. In November last year, Starbucks said that it was exploring strategic partnerships for its Chinese operations, after a media report said the company was considering selling a stake in the business to a local partner. (Reporting by Kane Wu and Julie Zhu in Hong Kong; additional reporting by Casey Hall in Shanghai; Editing by Sumeet Chatterjee and Himani Sarkar)
Reuters
25-02-2025
- Business
- Reuters
Exclusive: KKR, Fountainvest and PAG among those eyeing Starbucks China stake, sources say
HONG KONG, Feb 25 (Reuters) - KKR & Co (KKR.N), opens new tab, Fountainvest Partners and PAG are among buyout firms interested in acquiring a stake in Starbucks' (SBUX.O), opens new tab China business, four sources said, as the U.S. coffee chain looks to revive flagging sales in its second-largest market. Chinese companies, including state-owned conglomerate China Resources Holdings and food delivery giant Meituan ( opens new tab, have also been approached as potential buyers, said one of the sources with knowledge of the matter. Starbucks' executive vice president and chief financial officer, Rachel Ruggeri, is expected to be among senior company executives visiting China in the coming weeks to hold sale talks, said two of the four sources. All the sources spoke on condition of anonymity as the information is not public yet. The size of the stake to be sold in Starbucks' China business has not been determined and would be subject to negotiations, the sources said. The names of the interested bidders have not been previously reported. The Seattle-based company would likely prefer a franchisee deal with a strategic partner as part of a stake sale plan, said two of the sources. In a franchisee deal, Starbucks China would be valued at more than $1 billion, they added. KKR, PAG and China Resources declined to comment, while Fountainvest and Meituan did not respond. The talks come as Starbucks CEO Brian Niccol, who took the top job at the coffee chain in August, faces a daunting task of steering the company back to growth amid falling demand in the U.S. and China as well as a decline in its share price. Starbucks said on Monday it would eliminate 1,100 corporate roles as Niccol's "Back to Starbucks" plan focuses on streamlining business through job cuts and by improving customer experience at its U.S. stores. In China, home to more than a fifth of all Starbucks stores, the chain is dealing with a sluggish economic growth and stiff competition from local brands such as Luckin Coffee, which has gained market share with cheaper products and a wider coverage in lower-tier cities. Starbucks has been in informal talks with several private equity firms and companies since the second half of 2024 about strategic options for its China business, the sources said. A Starbucks spokesperson declined to confirm the content of the story and referred Reuters request for comment to Niccol's remarks on China at the earnings call in January, after his first market visit to China. Niccol said at the time that he saw several near-term changes Starbucks could make to strengthen its business while continuing to explore strategic partnerships to grow in China. In November last year, Starbucks said that it was exploring strategic partnerships for its Chinese operations, after a media report said the company was considering selling a stake in the business to a local partner. here.
NBC News
12-02-2025
- Business
- NBC News
A global coffee price spike is about to drip into your mug
Climate impacts can increase the prevalence of diseases in coffee crops, reducing overall yields for farmers. Studies have shown that the arabica bean — which makes up roughly 60% of all coffee produced globally — is particularly vulnerable to climate change. And while U.S. coffee producers in Hawaii, Puerto Rico, California and elsewhere sell homegrown beans, their output is nowhere near enough to satisfy domestic demand, a reality shared by farmers of imported specialty crops from wasabi to goji berries. 'As the long-term climate changes, these weather conditions are far more likely to hit extremes and cause losses in coffee yields as well as volatility to coffee production,' said Jeffrey Sachs, a sustainable economist at Columbia University. Retail coffee prices are expected to rise in a 'pronounced' way during the first quarter of this year, the Bank of America analysts wrote in a note to clients. They expect major food companies — such as J.M. Smucker, which sells coffee under multiple brands including Folgers, and Keurig Dr Pepper, which sells Lavazza coffee — to pass at least some of the cost increases on to consumers. Neither company responded to requests for comment. So far, higher coffee prices on commodity markets haven't fully percolated into consumers' mugs. Federal data released Wednesday showed the prices people paid for coffee, in all its forms, were roughly flat from December to January, though they were up 3.1% last month from 12 months earlier — just a little bit hotter than inflation overall. But instant coffee prices have been heating up, soaring 7.1% last month from a year earlier, and by 4.4% just from December to January. The overall cost of drip coffee has risen every year since 2021, when it was $0.12 per cup, according to market researchers at NIQ. They estimated one cup of drip coffee cost $0.18 at the start of this year, while coffee pods like the ones that get popped into Keurig machines have also trended higher. Those, too, have risen steadily, from $0.50 per cup in 2021 to $0.55 at the start of 2025. Major roasters such as Starbucks have sought to reassure investors about their strategies for handling global price spikes. 'Our year-over-year coffee price impact was minimal,' Starbucks CFO Rachel Ruggeri recently told shareholders. Sachs said he expects coffee prices to remain high in the coming months — and that climate change is likely to bring more major blows to global food supplies over the next decade. The world must bring down greenhouse gas emissions much faster to reduce these accelerating risks and ramp up investments in agricultural resiliency systems, he and other climate researchers warn. The global coffee shortage has driven U.S. imported coffee bean supplies to its lowest level since November, according to data from Intercontinental Exchange. Arabica coffee production in Brazil is set to decline this year by 12.4% from last year, according to the Brazilian ministry of agriculture. If that production forecast proves accurate, it would be the lowest level since 2022, analysts at ING said last week.
Yahoo
12-02-2025
- Business
- Yahoo
Starbucks Corporation: Analysis of the Global Coffee Giant
Starbucks Corporation is an American multinational chain of coffeehouses and roastery reserves founded in 1971. Starbucks has had a tough financial year in 2024, and has seen declining revenues across both its US as well as global stores. Accelerated investments on the part of management to attract customers, as well as more in-app promotions did not garner enough excitement among consumers as expected, with the economic issues in China further driving down sales. CFO Rachel Ruggeri commented that the resultant decline in traffic hurts both Starbuck's top-line and bottom-line and reiterated that the turnaround process for the iconic brand will take some time. Appointment of former Chipotle CEO Brian Niccol as the new CEO is promising, and management remains committed to returning value to shareholders as much as possible and increased their cash dividend for the 14th year in a row. The new appointment and the resulting earnings for Q1 that beat analyst expectations have provided respite for the stock and it has seen a substantial rise for the first time in a year. Considering the current P/E levels, a long-term investor would benefit from exiting their position at Starbucks to collect a healthy profit and returning to the company at a later date once the turnaround is in full-swing. A tough year for Starbucks led to the ousting of CEO Laxman Narasimhan after only a year and a half, leading to the appointment of Chipotle CEO Brian Niccol as his successor, who achieved tremendous success with the latter. As the largest Coffee chain in the world, Starbucks has struggled with the problem of finding new growth opportunities in a fiercely competitive market. Starbucks was able to raise revenue for 3 consecutive financial years from FY-2021 (September- August), to FY-2023 by almost 10% on average each year, but profitability for the same period of time has been haphazard. Net Income increased 25% from FY- 22 to FY-'23, but this was after a dip in earnings of 25% from FY-'21 to FY-'22. In FY-'24, the trend has reversed again not only in terms of Net Income but from a Revenue standpoint as well. Total Revenues grew by only 0.58% for FY-2024, a vast drop in the growth of revenues from 11.5% seen a year earlier. A second issue facing Starbucks are the costs of doing business. Despite no change in revenues for the three months of Q4 compared with FY '23, there has been no reduction in operating expenses in order to boost earnings, and total operating expenses increased by 1.9% for FY-24. Despite heightened investments from management to curtail the revenue problem, Q4 results were equally as bad as Q3. Global comparable store sales decreased by 7% for Q4, and consolidated revenues decreased by 3%. There was also a decline in EPS of 25% down from Q4 '23. For the full financial year, global store sales decreased by 2% and EPS by 8% from the year prior, Store sales in the US also decreased by 6% for the year when consensus expected a decrease of 3%-4%, and transactions at stores open for a year minimum decreased by 10%, while sales in China, where Starbucks has a large presence, decreased by 14% for the year, more than consensus expectations of 11%. Management stated that decline was due to a cautious customer environment, the macroeconomic situation in China as well as targeted and accelerated investments like more promotions on the Starbucks app, not improving customer behaviors. Management also sought to increase investments from the fixed asset side, increasing Property, Plant and Equipment by 17.3% for FY-24 the result of which was the opening of 377 new stores in Q1 FY-25. With same store sales, i.e., sales from existing stores decreasing or remaining flat, these new investments will likely boost Starbucks revenues in the near-future as the company penetrates new regions. From the liabilities side of the Balance Sheet, Starbucks has a few issues. In the near-term, Starbucks finances are in trouble. The current ratio of 0.75 is worrisome, implying that the company has fewer liquid assets than needed to pay back short-term borrowings. This short-term liquidity issue is more pronounced when analyzing the quick ratio, which removes the effect of inventories, which for a company involved in making and storing coffee beans, is a substantial part of its current asset base. Quick ratio stands at 0.57, further highlighting the liquidity issue faced by the company. From a long-term lens, the company has substantial debt payments (over a third of all long-term debt) to be made until the close of the decade. Since the end of FY '23, Starbucks has taken on an additional $1 billion dollar note due February 2027 at an effective interest rate of 4.96%. Starbucks has outstanding debt totaling $6.6 billion due before the close of the decade. A second disadvantage is that the credit facility was entered in 2021 prior to the interest rate hikes by the Federal Reserve. Thus, the effective interest for the $6.6 billion credit facility is 3.89% which is much greater than the previous low interest rate environment of the 2010s. The Liquidity and Debt positions of the company have a few implications: As revenues continue to remain flat or decline, it is important that the company is able to have enough cash on hand in- order to pay dues if quarterly performances continue to underperform. From the debt side, having debt payments puts into question the investor's position in the company. If at all Starbucks is put in a situation of insolvency, the massive debt payments would override any investor claims on assets, leaving equity-holders with nothing. From a financial management perspective there are a few positives; Net cash from operations for FY-24 is enough to cover long-term debt payments until March 2028 ($4.8 billion due by then). The company has also decreased its current liabilities by 3%. Although this value is small, it is important when considering the broader picture; a small reduction is valuable during times of depressed revenues and tightening liquidity. Management also increased the cash from $0.57 to $0.61; an increase in the dividend for the 14th consecutive year. Starbucks has generated poor returns for investors over the last decade, and has only started to improve its performance against the S&P 500 Index in recent months as the new CEO has had some time to set new initiatives in motion and as the company looks to turnaround. The graph below illustrates the performance of Starbucks compared to the index across both 1-year and 5- year periods. The recent CEO changes coupled with a consistent dividend has allowed Starbucks to perform slightly better against the S&P 500 Index when compared across a Total Return Basis. Starbucks's P/E ratio of 34.8 is higher than that of the S&P500 Index at 28.77, although this is a worrying sign for an investor; the elevated P/E reflects the market's sentiment that the recent executive change is a positive one, and with the company beating analyst estimates for Q1 FY- 25, there is hope that a turnaround for the company will be in full-swing going into Q2. McDonalds and Chipotle Mexican Grill are two companies with size and scale in similar scope to Starbucks operating within the Food & Restaurants Industry. McDonald's with almost twice the market capitalization of Starbucks ($210 billion vs $110 billion) is valued at a P/E of 25.34, and although this P/E is lower than Starbucks's P/E, the stock has actually returned -1.37% over the last year, indicating that investors believe that there are more growth opportunities in Starbucks despite the company's poor margins over the last few quarters. Chipotle Mexican Grill on the other hand, with a similar market capitalization to Starbucks at $80.8 billion has performed remarkably well, returning 21.12% and a whopping 236.6% over the last 1 year and 5-year periods, over double the returns of the S&P 500 (graph below). The PEG ratio also illustrates Starbucks current position, being a high level at 3.44. This means that the P/E of Starbucks is 3.44 times its projected earnings growth rate, which is quite high and highlights the primary issue plaguing Starbucks of stagnant revenues and slow growth. Q1 FY-25' revenues came in at $9.4 billion, above consensus estimates of $9.31 billion, and the company reported EPS of $0.69/share as compared to consensus estimates of $0.67. Although, these numbers are not massive, it is a signal to the market that the company has instituted positive changes that have shown up in the bottom-line. CEO Brian Niccol also initiated the Back to Starbucks strategy which aims to cut down menu items by 30% and return to the company's long-standing brand image of a cozy coffeehouse that provides patrons with a space to chat with friends or work in peace. Niccol is also reorganizing the leadership group within the company with the goal of hiring former executives of Taco Bell. Although Starbucks is going through a period of turmoil, the bright spot for the company is its strong brand presence and the loyalty it derives from its regular customers. Starbucks has been able to carve an identity for itself as more than a coffeehouse but a place for community and it helped pioneer the brand-building culture that many other global stores adopted. A positive sign for Starbucks heading into the future is the hiring of former Chipotle CEO Brian Niccol as new CEO of Starbucks. Brian was the architect behind the great performance of Chipotle over the last few years as mentioned previously. At Chipotle, Brian was able to increase profits seven-fold during his six years, for which investors in Chipotle are currently being rewarded. Though this change is a step in the right direction, there are multiple hurdles for Brian to tackle as CEO if he wants to bring growth and renewed public interest in the company after many years. For a long-term investor, it would be a good time to sell their stake in Starbucks as the company has seen a significant rise in price in the last month, due to the turmoil and the poor performance of the company as compared to its peers. If the investor desires an exposure to Food & Restaurant Companies, it would be better to shift their focus to companies Like Chipotle or even a smaller company like Texas Roadhouse that has had impressive results over the last few years and is valued at a similar P/E to Starbucks. For the short-term investor, the elevated P/E levels may turn off an investor looking to make reliable returns in the near-term. The investor can take a gamble on the company at the moment, and if the turnaround goes as expected, the investor can expect to see a rise in price as FY-25 winds down in September. At this point in time, a prudent investor would be better off waiting for a drop in price before entering into a position in Starbucks. This article first appeared on GuruFocus. Sign in to access your portfolio
