Over the past quarters, Starbucks has seen a steady increase in the number of 90-day active Rewards members. In the latest earnings call, it was revealed that the number of active 90-day active Starbucks Rewards members in the US grew by 30% to a record 24.8 million members in 2021. This is a result of Starbucks continued investment to leverage on the digital mobile and data-powered AI capabilities to accelerate the growth in the rewards membership to increase customer loyalty base and to drive sustainable growth over the long term.
In China, the next largest market for Starbucks after the US, the 90-day active members count hit 17.9 million in Q4 2021 which is a 33% increase over the prior year. Though the Q4 sales in China have been hit by the COVID restriction volatilities, there is still much room for growth in the China market. In 2021 alone, a net total of 654 new stores were opened in China, giving a total of 5,360 stores in China as Starbucks heads towards its goal of opening 6,000 stores by 2022.
We always focus on the long term, sustainable growth and performance of the companies in investing. There can be many economic or market events taking place in the short term, but companies with strong fundamentals will eventually be able to tide through the near-term volatilities.
While we can’t expect a growth rate that is comparable to those of the technology companies, Starbucks is still a quality company with strong financials and brand establishment. In fact, it is one of the companies with strong pricing power that can be a beneficiary as inflation looms.
The pricing team at Starbucks uses machine learning to determine their pricing plans, the magnitude of price hikes and on which products. For instance, in one of previous price hikes, Starbucks had taken a strategic approach to apply price increase only to the tall size brews while maintaining the pricing for grande and venti brews. Given the premium brand positioning of Starbucks, it has built a loyal customer base who are relatively less price sensitive for the premium beverages. This allows Starbucks to take a dynamic approach at managing its pricing while growing its customer base.
Recovery of the sales affected by the pandemic has also been driven by Starbucks’ effort to expand its portfolio of drive-thrus and delivery service. The continued evolvement and adaptability of Starbucks allows the company to stay ahead of challenges.
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Thanks for the article. I saw the crazy price decline on the earnings day and was scared off by it too haha although the stock has been in my stock list. If only I read your article earlier then I could have bought in the next day.
Hi James, do not be too worried! There are always opportunities in the markets for us to add some positions of our favourite stocks. Be patient and keep a look out in the markets.