Starbucks, Pepsi take bottled coffee overseas
Thursday September 27, 6:38 pm ET LOS ANGELES (Reuters) - Starbucks Corp and PepsiCo Inc said on Thursday they were expanding their bottled coffee business into countries outside North America, with an initial foray into China.
The companies would not disclose financial terms of the deal or say what other countries they are targeting, except that they could include those that do not yet have Starbucks stores.
"Even in countries where we don't have stores, people know the brand," Gerry Lopez, president of Starbucks' Global Consumer Products Group, said in an interview. Lopez added that the products would likely be in about four new markets, including China, within the next two years.
Starbucks and Pepsi's joint venture sells bottled Frappuccino coffee drinks, Starbucks DoubleShot espresso drinks and Starbucks Iced Coffee in North America.
Starbucks also sells ready-to-drink coffee beverages in South Korea, Japan and Taiwan through deals with other companies, which will not be affected by the deal with Pepsi.
This is a smart, sensible move on Starbucks' behalf. In new markets this should help Starbucks gage where strong demand is and where opportunity for actual stores are. Pepsi and Starbucks have really been expanding and developing their relationship lately, whether or not it will have a noticeable impact on results remains to be seen. If I were to guess, we won't see anything too extraordinary, but it does expand the brand and if by some small chance people actually don't know who Starbucks is it should expand their customer base as well. I think it's a smart way to go along with international expansion.
Anyway, I am still very confident about the company's future prospects and opportunity. The business still has plenty of room to expand and once they do reach a more mature stage in growth (which it seems like we've slightly started to get into) it should be a consistent business. The stock isn't insanely cheap with a P/E of 33.17, but I think the valuation is reasonable for investors who focus on the long-term aspects of the business. Over the next 15-20 years, I definitely believe we have a market beater here.
Tags:
china, coffee, international, pepsico, starbucks
Posted at: 05:09 PM | Add Comment
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