Strabucks stock

If there's an uncertain stock on Nasdaq, it is Starbucks corp.( NASDAQ:SBUX ). What's happening with Starbucks is that people DO believe Schultz will bring back the company as it was before its fall but they DON'T want to make the first move, in case Mc Donald's ( NYSE:MCD ) wins the lattes war against Seattle's giant. This is a misunderstanding of the two companies ; each has its own customers base:

Two different markets

A recent market study orchestrated by Hitwise showed that Mc Donald's customers earn less than 50 000 dollars a year when Starbucks clients earn more than 60 000 dollars a year! Beyond this point, if people are willing to pay 4,80$ for a grande latte, they also want a brand experience. Starbucks offers them a big place with sofas and fresh design and good music ( they have their own music label " Hearmusic " , that has produced CDs of Paul McCartney, REM, Jack Johnson, Willie Nelson, etc.). I'm not sure that Mc Donald's can offer the same experience, think about a barista calling " a grande nonfat latte with a big mac extra cheese " in a restaurant that smells of meat all over the place...
Starbucks and McDonald's are just not competing for the same market at all!

But here's a good reason why people should care about sbux stock: The company was multiplying stores all around the world when, at the same time, Arabica growers told the world they won't fill the demand ! All over the planet, more coffee shops open than ever before and using the best grains on the market, usually Arabica ones. ( forget about dunkin donuts Robusta coffee that taste anything but water... we're in a new era!) Just in China, READ THIS CAREFULLY, people are now drinking more coffee than tea! So it's very hard to fill the demand, and Starbucks has to live with the fear of higher and higher Arabica'prices: Schultz said, when he was promoted president of the company, that he'll stop the multiplication of stores all around the world to maintain the quality of coffee in actual stores.
If Starbucks really listen to its Arabica growers, it will guarantee customers some quality in their cup and maybe stop costs raises

Why I believe in Starbucks

Sbux is at a low of 15$ per share. At the same time, Schultz is promising lots of things to bring investors back in the game: As I was in New-York, I stopped by a Starbucks and ordered an espresso. I didn't really like it and told a barista about it( it was the first time my sbux espresso taste very bitter) , and after he apologized for it and gave me an other one, he told me that by 2011, every Starbucks will have a new espresso machine!

Starbucks standards have also changed. Schultz wants his coffee to be the best in America, a good thing when you've read that a jury of Consumer Report selectedMcDonald as the best coffee in America, not Starbucks.

Well, what's important it's that standards have evolved since that; milk has to be steamed only once, while 68 oz. pitchers are prohibited; now stores have to use 34 oz. pitchers to keep the milk fresh. The same kind of rules apply now for espresso shots. Temperature and weight of your beverage are also more controlled.

Finally, I think what Starbucks needed to do was to remember where the coffee experience started, in a fine coffee shop in Seattle. Starbucks is a brand representing quality, but also "avant-garde" when the stores introduced good coffee to their customers. With Schultz back in the direction, I'm pretty sure things will go better for the company. And as Jim Cramer said, the company won't restructure in one week; it will take some months before we may recover from the drastic fall the stock had to deal with.

Next wednesday, april 30, Starbucks will have its earnings conference call for its second financial quarter. Here's a good way for those who want to figure out if the stock will go up or down.