Starbucks Corp. (NASDAQ: SBUX) must have become so successful recently that its supply chains are strained. It seems to be running out of things more than it used to. While the shortages may be a sign of solid expansion, they are also likely to alienate customers. Supply chain issues cut two ways.
The coffee chain is growing, and very fast. Starbucks numbers for the most recent quarter were extraordinarily strong:
- Global comparable store sales increased 6%
- Americas and U.S. comp growth of 6%
- EMEA comp growth of 6%, representing the highest growth in EMEA in 14 quarters
- China/Asia Pacific comp growth of 7%, driven by strong traffic
- Consolidated net revenues increased 9% to a Q2 record $3.9 billion
- Channel Development revenues grew 10%
- Consolidated operating income increased 18%, or $100 million, to a Q2 record $644 million
- All reportable segments contributed to an operating margin increase of 130 basis points to a Q2 record 16.6%
- Earnings per share grew to $0.56, up 17% excluding a $0.03 non-routine gain in the prior year Q2 related to the sale of the company’s equity in its Mexico joint venture
- The company opened 335 net new stores globally, including the 20,000th Starbucks store. Total company store count across all brands grew to 20,519.
Those 20,000 stores have to be a logistical nightmare when it comes to the problems of getting the right food, coffee, CDs, newspapers, coffee cups and pastries to each and every store, each and every day.
Notably, in New York, Starbucks has regularly been out of the following:
- Oatmeal (Classic Whole-Grain Oatmeal). Worse, sometimes the oatmeal is available but brown sugar and berries are not. Some people won’t buy it without the extras
- Carrying trays. Made of cardboard (probably recycled somehow). Without these, people who buy more than two drinks have real trouble carrying them. Starbucks offers paper bags, which, when made wet by coffee, fall apart
- Newspapers. Almost always gone by 7 a.m.
- La Boulange pastries. Starbucks has pushed these for months. Too bad some of the more popular ones are not around by mid-day. It would be a good source of revenue. And inventory control should be based on satisfying the customer and not saving money.
When asked why these products are not available, Starbucks workers always say the same thing: “They were in the order when it came in today” (or yesterday, or earlier this week). In other words, supply management at Starbucks is well under perfect.
By the way, when was the last time someone at McDonald’s said they were out of anything?