Starbucks ($SBUX) — Another Activist — August 10, 2024
A few weeks ago, Elliott Management disclosed a multi-billion stake in Starbucks. On Friday, another high profile activist firm in Starboard Value disclosed their own investment in the iconic, yet struggling coffee chain.
as another activist involved at Starbucks. I welcome this news. I do think Starbucks is making the right changes. They’re fixing throughput problems, pushing more people to their app and loyalty program, driving better affordability and cutting considerable cost out of the model. The focus on sugar free energy drink growth is also well-placed. Furthermore, they’re right to continue opening stores in China. Cash on cash returns for new stores there are excellent and incremental to overall results… that’s just being clouded by the wildly challenged competitive environment there today. This is still an iconic brand that dominates preference charts across all age cohorts and boasts a still long runway (especially in places like India and Latin America).
With that said, new leadership certainly has been far from perfect. I see it as a large positive to have these two powerfully influential voices in the room to steer decisions in the direction of shareholder favorability and profitable growth. One thing I’d love for them to do is forcefully push Starbucks to embrace the lunch and dinner dayparts more wholeheartedly. They’ve debuted some menu items, but these stores are sitting largely empty for chunks of the day. That’s why Dunkin’ Donuts and Baskin Robbins partner on real estate. I don’t think Starbucks should do that, but I do think the menu needs a lot of work. Stick to your coffee core while also doing a lot more.
