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Starbucks Expands Packaged Coffee and Tea Business

The business accounts for 20% of Trefis' estimated stock price for Starbucks.
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Starbucks

'

(SBUX) - Get Starbucks Corporation Report

packaged coffee and tea business is growing.

The company sells Starbucks-branded coffees and teas through arrangements with grocery stores as well as retailers such as

C ostco

(COST) - Get Costco Wholesale Corporation Report

and

Wal-Mart

(WMT) - Get Walmart Inc. Report

.

As consumer spending picks up with an improving economic environment, we expect further growth in Starbucks' packaged coffee and tea revenues.

Starbucks competes with

McDonald's

(MCD) - Get McDonald's Corporation Report

,

TheStreet Recommends

Caribou Coffee

(CBOU)

and

Peet's Coffee

(PEET)

in the broader market for specialty coffee.

We estimate that packaged coffee and tea accounts for 20% of the $24 Trefis price for Starbucks's stock.

The packaged coffee & tea business is part of Starbucks' specialty operations that help extend the company's branded products through a number of third-party channels. Starbucks' revenues from this business increased from $254 million in 2005 to $364 million in 2009. Currently, Starbucks' packaged coffee and tea are available in around 37,000 stores worldwide.

Starbucks has developed partnerships with many retail companies in 2009 to market Starbucks' processed and packaged products internationally. Starbucks plans to aggressively leverage these partnerships and expand into new locations throughout 2010 and beyond.

Additional factors like aggressive pricing, new packaging graphics, and new product sizes should continue Starbucks' boost revenue growth.

Starbucks is also seeing strong demand for VIA, an instant coffee brand launched last year. The company recently announced that it's expanding VIA ready brew portfolio by adding more flavors.

The average of Trefis member forecasts for Packaged Coffee & Tea revenues indicate an increase from about $400 million in 2010 to about $580 million by 2016, compared to the baseline Trefis estimate of an increase from $382 million in 2010 to $512 million by the end of the Trefis forecast period.

Despite the differences, the member estimates imply an upside of only 1% to the Trefis price estimate for Starbucks' stock.

You can drag the forecast trend-line above to express your own view, and see the sensitivity of Starbucks's stock to Packaged Coffee & Tea revenues.

Our complete analysis for Starbucks's stock is

here

.

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