In 2013 Starbucks Is America

NEW YORK ( TheStreet) -- On vacation in England recently, I avoided Starbucks ( SBUX), while the people I was visiting just as eagerly longed for it.

We were motivated by the same call, America.

Living here you can sometimes forget how big a deal this country is to the rest of the world, and how symbolic it remains of the good life. That's what Starbucks sells outside the United States -- not coffee, but a few minutes in America. Where the couches are comfortable and the WiFi is free.

This is especially true in markets like China, where the company will soon open its 1,000th store. As a local blog called The Beijinger put it, "Starbucks in China has never been about coffee." It's about creating a middle ground, an illusion of freedom to speak and equality of rank, in a country where that's very rare.

In a way, Starbucks today occupies the position Coca-Cola ( KO) did right after World War II. It's a symbol of America's best qualities and its relative safety. A Coke was uniformity in a bottle, a refreshing drink that wouldn't kill you. Starbucks is a place where you can feel safe, equal and free.

Both are illusions, but American business thrives on illusions. Movies are illusions, advertisements are illusions. Illusions have immense power in places where reality feels dismal.

This gives Starbucks tremendous room to grow, with expanding margins, because price is not the issue. The company now brings about 10 cents on every dollar to the net income line, after taxes, and unlike some other companies its tax bill is rather hefty, about 32%.

Which brings up another point about Starbucks. The image it projects is the more benign, liberal face of America. Its request that customers leave their guns at home is a signal to international markets that don't understand America's current gun addiction, a sign Starbucks doesn't either.

CEO Howard Schultz also cultivates an image that reminds me of the legendary Coca-Cola CEO Robert Woodruff. He gives lip service to environmental causes and his endorsements to President Obama and ObamaCare. But he's also a deficit scourge, having supported an anti-gridlock group called "No Labels" back in 2011.

So while he's seen as a Democrat, he's not seen as outside the mainstream. The stance also helps grow the company's international footprint. Schultz's politics are seen as benign.

Right now most of Starbucks issues are similar to those which bedeviled another American icon, McDonald's ( MCD), when it first sought global domination. McDonald's is a little more than twice as big as Starbucks. There are two issues here -- adapting the product to local tastes, and extending the sales day.

McDonald's rolled out veggie burgers in India, along with kosher and halal food in the Middle East. Starbucks has bought a second tea brand, Teavana, the Evolution Fresh juice brand and Pascal Rigo's La Boulange bakery chain. Starbucks has even experimented with selling beer, wine and small plates in some markets, which it calls Starbucks Evenings.

Thus, in a market that some call overheated, Starbucks is selling at an insane (for a food company) multiple of 36.5 times its earnings, and nearly five times its sales. Yet it remains on the buy lists for most analysts, having quadrupled in value over the last five years, rising 42% in 2013 alone. Our Chuck Carnavale is also a big fan.

Five years ago Starbucks closed all its stores for a night of retraining and staff pep talks, then it closed 600 stores. Today Starbucks is through the crisis, the stock is a blue chip and CEO Schultz is a business legend.

That's the kind of story America likes to sell, and it's also the kind of story the world likes to buy from us.

At the time of publication the author held MCD.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Dana Blankenhorn has been a business journalist since 1978, and a tech reporter since 1982. His specialty has been getting to the future ahead of the crowd, then leaving before success arrived. That meant covering the Internet in 1985, e-commerce in 1994, the Internet of Things in 2005, open source in 2005 and, since 2010, renewable energy. He has written for every medium from newspapers and magazines to Web sites, from books to blogs. He still seeks tomorrow from his Craftsman home in Atlanta.

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