Starbucks Expands Shops in Mexico as US Slows Mica Rosenberg - Reuters go to original
Coffee chain Starbucks shut down its stores Tuesday evening for a mass training session. The java giant is hoping to give its business a boost as it prepares to battle with new rival McDonald's, which will be serving espresso based drinks. Meanwhile Dunkin Donuts offered its espresso based drinks for 99 cents. Reuters' Bobbi Rebell reports.
Mexico City - Dozens of new Starbucks stores will open this year in Mexico, according to the chain's Mexican partner, part of an overseas expansion plan that could offset slower sales in an oversaturated U.S. market. Fast-food franchiser Alsea (ALSEA.MX) has opened 201 Starbucks (SBUX.O) coffee shops since the brand first entered Mexico just over five years ago and now stores are popping up around the country at one of the fastest rates in the world. Alsea, which also operates Domino's Pizza (DPZ.N) and Burger King (BKC.N) restaurants, will open at least 80 new Starbucks stores in 2008 and wants to keep that pace over five years as Mexico's middle class grows and picks up on U.S. coffee drinking trends. "When we opened our first store in 2002 we were opening an average of one store a month. Now were are up to six or seven a month," said Gerardo Rojas, who manages the Starbucks brand for Alsea. "We have stores in 23 cities and the idea is to open in more than 10 new cities this year. We want to continue with this aggressive growth," Rojas told Reuters in an interview. The rapid expansion in Mexico could help offset store closings, layoffs and slumping stock prices in the U.S. market where an economic slowdown has affected sales. Starbucks share prices have been falling steadily since May of last year when its stock was above $30. In January, the coffee giant announced it was closing 100 underperforming U.S. stores and slowing new domestic openings. Last week the company announced it would slash 600 U.S. jobs. "They are looking at their sales figures and figuring out in the United States they are practically saturated and they see in their overseas stores that they are not saturated at all," said James Walsh, an analyst at Coldstream Capital Management. "In many markets overseas they are 15 years behind where they started in the United States. There is an opportunity there to create a new market," said Walsh. Seattle, Washington-based Starbucks cut its forecast for 2008 U.S. store openings to 1,175 from 1,600 but plans to increase international store openings by 75 outlets to 975. While U.S. same-store sales fell 1 percent, hurt by a decline in traffic, international same store sales were up 5 percent. Last year, Starbucks said it was opening coffee shops in Bulgaria, Russia and Portugal. Alsea said it will grow its operations this year in Latin America, taking Starbucks to Argentina and expanding in Chile where it runs 22 outlets and Brazil where it has eight stores. Mexico, a coffee producer, has one of the world's lowest coffee consumer rates at about 1 kilo per person per year. Some European countries are above 10 kilos a year. Rojas sees the low consumption figures as an opportunity for growth, especially as incomes rise in Mexico. But convincing Mexican consumers used to drinking sugary, weak instant coffee to pay a premium for quality brews will still be a challenge, said Walsh. "In the United States Starbucks kind of created that whole market of high-end coffee where people actually differentiated between an espresso and a cup of joe. They will probably have to do that in most markets they expand into," said Walsh.
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Business News | February 2008 
Mica Rosenberg - Reuters
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