Coffee giant Starbucks (SBUX) became a coffee giant for good reasons. It brought the coffeehouse aesthetic out of Washington state and transferred it throughout the United States, and eventually, into the world. But with coffee tastes changing, more competitors stepping in, and one in particular, Dutch Bros. (BROS), proving especially troublesome, this is leaving Starbucks in an increasingly tenuous position. Investors were clearly concerned, though, as shares ticked up fractionally in Monday afternoon’s trading.
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The situation is not yet dire, reports note. Right now, about 85% of the United States coffee market is controlled by either Starbucks or Dunkin Brands. The rest of it is made up of a combination of “…dozens of smaller chains and thousands of independents.” But things are clearly changing, as major brands are stepping in to assert their own ambitions in the specialty drink market, and smaller chains like Dutch Bros. are growing and mounting credible threats to Starbucks.
To be sure, Starbucks is fighting back. The combination of Green Apron Service and Back to Starbucks initiatives represents serious potential that is starting to show some life. But Dutch Bros is making advances in a sector Starbucks sorely needs to succeed: Gen Z. About half of Dutch Bros’ frequent customers are in the Gen Z or millennial market. With 94% of their orders focusing on cold drinks, Starbucks may have problems with simply supplying the right kind of product to begin with.
But At Least We Have Cool Tumblers
Meanwhile, Starbucks recently rolled out a line of holiday special tumblers. A co-production with Disney (DIS), the annual collectible release went live on Halloween night, which is an odd time to release tumblers that feature peppermint swirls that look vaguely like Mickey Mouse.
The peppermint version has two models: the first is a 40-ounce travel tumbler with charm that sells for $59.99, while the second is a smaller 24-ounce version for $29.99. A third features pumpkins, holds 30 ounces, and sells for $49.99. Reports suggest these are highly anticipated releases and may sell out quickly.
Is Starbucks Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 13 Buys, seven Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 16.65% loss in its share price over the past year, the average SBUX price target of $98.17 per share implies 21.15% upside potential.
