Can Starbucks Corporation (SBUX) Keep Growing?

Beyond the cafe

The last, and potentially biggest, opportunity for Starbucks is consumer packaged goods. Starbucks believes that its “channel” business could one day be as big as its cafe business, despite representing less than 10% of revenue today. If this vision eventually comes to fruition, Starbucks stock will be a bargain at today’s prices.

Starbucks plans to build all of the brands that it owns — including its recent acquisitions — into well-known, highly respected franchises. It is already the leading premium packaged coffee brand, but management wants to grow the company’s packaged coffee market share while also creating a major presence in the tea and juice markets. The CPG channel offers higher margins than the cafe business, so it could become a significant profit driver for Starbucks as it grows.

Foolish conclusion

While Starbucks already seems ubiquitous, it actually has significant growth opportunities ahead. Starbucks stock does fetch a valuation premium to the market, but it has a talented management team lead by Schultz. There may be some bumps along the road, but the company’s initiatives to diversify into new geographies (especially China), new product lines (tea, juice, and baked goods), and new distribution channels will position it for growth. For long-term investors, Starbucks stock looks like a solid investment opportunity.

The article Can Starbucks Stock Keep Growing? originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends PepsiCo and Starbucks. The Motley Fool owns shares of PepsiCo and Starbucks.

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