Los Angeles - Think that the US is already overpopulated with a Starbucks on every 
corner? Just wait. The fast-growing chain in the world plans to nearly triple in size 
and some see it growing even bigger, one day topping hamburger giant McDonald's as the 
largest fast-food brand in the world. 

The chain has set a goal of 30 000 units, half in the US, but last month the company's 
chairperson suggested the target is too low, leading to speculation on what is the 
limit for the chain - and when Starbucks will set a new goal. 

Starbucks is credited with rapidly transforming coffee from a 50c staple to a $3 indulgence 
with its chain of comfortable cafes, where customers often hang out with their laptops or 
newspapers for hours. 

The chain has been criticised for driving independent coffee shops out of business while 
aiming to give its own stores a local feel by sponsoring community events and steering clear 
of national advertising. 

Right on target

Already the world's biggest coffee shop chain, Starbucks' store count has 
soared to over 11 000 from less than 200 since the Seattle-based company went public in 1992, 
and at current growth rates it could hit its target in about five years. 

Starbucks has several things going for it, analysts say. First, new products like holiday 
drinks have kept customers coming back for more. Plus, coffee is a habit for many. 

"Really important to the company is the new product introductions - it keeps the customers 
coming back," said JMP Securities analyst Kristine Koerber, who has a "market outperform" 
rating on Starbucks shares and owns none. "And it helps selling a product that is considered 
habit forming." 

In addition, Starbucks' brand has a cachet that consumers want to associate themselves with. 

"It's not a restaurant, it's a lifestyle model," said ThinkEquity Partners analyst Nicole 
Miller, who has a "buy" rating on Starbucks shares and owns none. "McDonald's is really a 
fast-food restaurant. That's why (Starbucks) will be able to have more stores." 

CIBC analyst John Glass agreed, writing recently that Starbucks could well become the largest 
quick-service restaurant brand in the world. Glass has a "sector outperformer" rating on the 
chain's stock. 

30 000 goal "light"

Starbucks itself has begun to raise the possibility that it's 30 000-store target, set in 
late 2004, is too low. 

"I'm quite sure that number is going to be light," Starbucks Chairperson Howard Schultz told 
investors. He did not give a revised figure or a timeline. Starbucks executives were not 
available to be interviewed for this article. 

There is room in the US and abroad, backers say. 

"It's ridiculous to think they can't have more than two times the number of stores inter-
nationally than domestically," said Miller. "They could have 30 000 just internationally." 

Starbucks has said its 230-store China unit is its biggest opportunity outside the United 
States. With roughly 250 million people in China's upper income bracket that market could 
near the ultimate size of Starbucks' US business, Koerber said. 

"They could have over 10 000 units in China," she said. 

Glass said there is plenty of room to grow at home, as well. Seattle, Starbucks' hometown, 
has one coffee shop for every 11 754 people, but rival Dunkin' Donuts has built out even 
more densely in its own home turf, Massachusetts, with a store for every 8 400 people. 

Thus much of Starbucks' US growth will come in markets where there are already hundreds of 
stores, such as the West Coast. 

The United States has room for as many as 22 000 locations, compared with the company target 
of 15 000, and Glass projected the company would raise that goal later in the year.

 Source: http://www.fin24.co.za/articles/default/display_article.asp?Nav=ns&ArticleID=1518-
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