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Starbucks Eyes Partner Sales Growth

The company's partner sales account for one-fifth of Trefis' estimate for its stock.
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Starbucks (SBUX) - Get Starbucks Corporation Report relies heavily on its partner sales.

Outside its own stores, Starbucks sells packaged coffee, tea and other products through national retailers, beverage manufacturers and institutional food-service companies. The partners benefit from Starbucks' popular products and strong brand, while Starbucks gets to leverage partner distribution networks.

We estimate that partner sales constitute around 21% of the $24.36 Trefis price estimate for Starbucks' stock. Any decline in these revenues could hurt the company's share value. Our analysis follows below.

Starbucks sells packaged coffee and tea globally through grocery and warehouse club stores such as Costco. Starbucks' packaged coffee and tea are currently available in nearly 37,000 such stores worldwide.

Starbucks' revenues from packaged coffee and tea sold by retail partners grew from around $250 million in 2005 to more than $360 million in 2009. We expect sales in this segment to reach $500 million by the end of the Trefis forecast period, as the total number of partner outlets rises.

You can drag the trend-line in the chart below to create your own packaged coffee and tea sales estimate for Starbucks and see how it impacts the company's stock price.

Starbucks sells whole bean and ground coffees as well as a selection of premium Tazo teas to institutional food service companies. Revenues from this segment grew from about $300 million in 2005 to $400 million in 2008 before declining in 2009 due to recessionary softness in the hospitality industry.

We expect Starbucks' institutional food-service revenues to remain at the $400 million level in 2010. In the next interactive chart, drag the trend-line to create your own institutional sales forecast for Starbucks and see how it impacts the company's stock price.

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Starbucks has formed partnerships with Pepsi, Unilever and Dreyer's to develop and distribute ice cream and ready-to-drink beverage brands such as Frappuccino, DoubleShot Espresso and Discoveries.

Licensed partner sales make the smallest contribution to Starbucks' third-party revenue stream. Revenues from licensed partners peaked at $97.5 million in 2008 before declining steeply during the 2009 slump.

We expect licensed partner sales to revive as the economy improves. And while most of Starbucks' licensing ventures are in the U.S., Starbucks can broaden its reach by forming joint ventures in international markets. The chart below shows the impact of licensed partner sales on Starbucks' stock price. Drag the trend-line to create your own estimate.

Starbucks is currently partnering with more than 30,000 fast-food outlets, supermarkets and coffee houses to re-introduce its Seattle's Best Coffee brand. If successful, this venture should boost Starbucks' partner revenues.

You can see the complete $24.36 Trefis Price estimate for Starbucks' stock




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