One way I evaluate companies is to create multiple hypothetical portfolios with Google Finance and compare overall gains. What I'm looking for is daily gains on one stock counteracting losses on another and Starbucks is in my best group.
Personally, Starbucks is not my go-to daily brand (for that it's Peet), but when out of town it's easy to recognize and consistently better than any diner\cart coffee. I've been to many Starbucks none of which are within a 10 mile radius of my house so I'll say I'm a customer by recognition and not loyalty.
Reading over the Q3 2013 report they are focusing on growing in-store sales with additions like baked goods, breakfast, lunch, and juices. They are also looking to bring tea sales from Teavana into the stores. While I applaud the tea angle, I'm against them throwing high-margin food products into stores hoping to increase add-on sales. If Starbucks sells pre-packaged foods at a high price they will be competing with companies like Whole Foods and Trader Joes. If they sell freshly baked foods then they in competition with Corner Bakery and Panera Bread. All areas outside Starbucks main focus of coffee. They also bought a juice company which is within the beverage business but more a move expected by Pepsi or Dr Pepper Snapple. Starbucks is trying to diversify their business but this growth can quickly turn Starbucks into a mini-mart.
A customer enters a Starbucks to get a premium drink which is why the Teavana integration is a great idea because it will attract non-coffee drinkers. Starbucks should create a more craft coffee experience to complement the artisan loose leaf Teavana offerings while renting out shelf space for the value-add baked goods. This way they can focus on the drinks business charging more for different preparations of coffee \ tea but keep people in the store with food items. Also marketing would be better targeted.
Coffee is a huge business and Starbucks has the brand recognition to handle any short term customer backlash from the changes they are making. I'll be following how Starbucks integrates these acquisitions into their stores before taking any positions.
