ib star bucks brazil web

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International Business Strategy:Starbucks Corporation



³We¶re not in the coffee business serving people.

We¶re in the people business serving coffee."Howard Behar, President of Starbucks International



STARBUCKS Expansion into

São Paulo, Brazil



Introduction and Company Overview Starbucks Products and Ventures

Why Expand into Brazil?

Starbucks¶ Expansion Philosophy Mode of Entry

Finances

Conclusion






Finances

Conclusion



Introduction Starbucks strives to become the mostrecognized and respected coffee retailer in theworld

Expansion of international operations is keyto furthering Starbucks¶ position in the coffeeindustry



Company OverviewStarbucks History:

Founded 1971 in Seattle, WA Named after first mate in Moby Dick Early on roasted and sold coffee beans 1980s began selling coffee by the cup



Company OverviewStarbucks History:

1987 - Howard Schultz bought Starbucks Schultz introduced the ³Starbucks Experience´ 1992 - 165 locations nationwide 1996 - International expansion began



Company OverviewStarbucks Today:

$6.4 billion in revenue Serving over 35 million patrons More than 7,500 shops in the US Operating 3,000 plus shops in 36 foreign

countries






Finances

Conclusion



Starbucks Products ST ARBUCKS stores offer regular anddecaffeinated coffee beverages, teas, pastries,muffins, and other breakfast foods



Starbucks Ventures

Starbucks DuettoTM VisaEthosTM Water

Starbucks Frappuccino® Starbucks ice cream






Finances

Conclusion




Strong coffee culture

Favorable political climate

Large Economy

Other American corporations¶ success



Strong Coffee Culture Coffee has been harvested since the early 1700¶s

³Café Mana´ ± Morning Coffee

Largest producer of coffee beans; twice as muchas the 2nd runner up - Vietnam

Soon to be the 2nd largest consumer ± behind the

U.S.



Favorable Political Climate Democratically elected President

Strong diplomatic ties with the U.S.

Current president¶s focuses on economicexpansion and encourages foreign investment



Large Economy Largest economy in South America

GDP approximately 620 billion and growing

5th most populated country in the world

Over 186 million people



American Corporate Success in Brazil Coca Cola ± 1940¶s

McDonald¶s ± 1960¶s

Most American Corporations outside U.S.






Finances

Conclusion



Starbucks¶ Expansion Strategy Wheel and Hub expansion method

São Paulo will be the hub

Spoke out into the rest of Brazil and beyond






Finances

Conclusion



Mode of Entry Foreign Direct Investments

Licenses

Joint Ventures



Mode of Entry

Joint Venturing with



Mode of Entry World¶s second largest retailer

7,000 stores internationally

Creator of hypermarket

99 hypermarkets in Brazil



Mode of EntryCarrefour has:

Strong brand name recognition

Readily available resources

Massive distribution network



Mode of Entry Targeted Hypermarket locations in São Paulo

1. Downtown district

2. Main business district3. Cultural District4. Shopping District

Focus on working professionals



Introduction and Company Overview

Starbucks Products and Ventures



Finances

Conclusion



Finances Carrefour 50% <> Starbucks 50%

$350,000 loans

R

etrofit coffee shop in hypermarketEquipment and beginning inventories

$100,000 infusion to sustain early operations



FinancesCritical Assumptions:

Sustain growth of 20% per year - 1st five years

Brazilian inflation hovers around 6-7%

Capital obtained at 10% for 7 years

Equipment life at least 5 years



FinancesCoffee Shop Setup

DESCRIPTION COST Notes

Building retrofit labor $89,000 Approx 40 man-weeks labor

Materials $91,000 Includes walls, bathrooms, plumbing, and counter constructionFurniture and displays $58,000 Tables, chairs, couches, displays cabinets, etc.

Equipment $76,000 Coffee/espresso makers, utensils, pastry warmers, ovens, etc

Setup inventory $36,000 Coffees, filters, supplies, pastries, etc

Operating capital $100,000 50% investor, 50% Starbucks

TOTAL $450,000



FinancesBreak-Even Analysis

Break-even Point = $18,200

-$100

-$50

$0

$50

$100

$150

1 2 3 4 5

YEAR

N e t E a r n i n g s

( i n

$ 1 0 0 0 s )



FinancesF Y 2007 F Y 2008 F Y 2009 F Y 2010 F Y 2011

REVENUE

Beverage Sales $ 184,900 $ 235,193 $ 299,165 $ 380,538 $ 484,045

Foodservice and other $ 11,094 $ 14,112 $ 17,950 $ 22,832 $ 29,043

TOTAL SALES $ 195,994 $ 249,304 $ 317,115 $ 403,370 $ 513,087Cost of Goods Sold $ 30,960 $ 39,381 $ 50,093 $ 63,718 $ 81,049

Gross Margin $ 165,034 $ 209,923 $ 267,022 $ 339,652 $ 432,038

Operating Expenses $ 254,160 $ 242,384 $ 253,021 $ 264,509 $ 276,386

Income before Taxes $ (89,126) $ (32,461) $ 14,001 $ 75,143 $ 155,652

Income Taxes (38%) $ - $ - $ 5,320 $ 28,554 $ 59,148

Net Earnings $ (89,126) $ (32,461) $ 8,681 $ 46,589 $ 96,504



Finances Project Losses in Years 1 and 2

Break-even in Year 3

Profit Margin Projections 14% in Year 4

22% by Year 5



Introduction and Company Overview

Starbucks Products and Ventures



Finances

Conclusion



Conclusion Most respected coffee retailer in the world

International expansion is key to success

Brazil is the next market to enter

Partner with Carrefour

Projected strong profitability by Year 5



Questions?

ib star bucks brazil web

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