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Starbucks • Green Mountain Coffee • J.M. Smucker • Mondelez International PowerPoint PPT Presentation


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Processed and Packaged Goods Starbucks Corporation Module 4 & 5: Parsimonious Forecasting & DCF Model Angie Zhao. Starbucks • Green Mountain Coffee • J.M. Smucker • Mondelez International. STARBUCKS. Return on Enterprise Operations. All in millions except ratios.

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Starbucks • Green Mountain Coffee • J.M. Smucker • Mondelez International

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Starbucks green mountain coffee j m smucker mondelez international

Processed and Packaged Goods

Starbucks Corporation

Module 4 & 5: Parsimonious Forecasting & DCF Model

Angie Zhao

Starbucks •Green Mountain Coffee •J.M. Smucker • Mondelez International


Starbucks green mountain coffee j m smucker mondelez international

STARBUCKS


Return on enterprise operations

Return on Enterprise Operations

All in millions except ratios


Return on enterprise operations1

Return on Enterprise Operations

  • RNEA of Starbucks was significantly above that of competitors

  • Reasons to be discussed

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Breaking apart rnea time series

Breaking Apart RNEA - Time Series

  • Fluctuations in RNEA are largely caused by fluctuations in EPAT resulting from many one-time items

  • E.g. 2013:

    • Litigation charges of $2.78b (Kraft Foods)

    • Income tax benefit of $1.07b


Breaking apart rnea time series1

Breaking Apart RNEA - Time Series

  • Fluctuations in RNEA are largely caused by fluctuations in EPAT resulting from many one-time items

  • E.g. 2013:

    • Litigation charges of $2.78b (Kraft Foods)

    • Income tax benefit of $1.07b

    • EATO – stable and increasing


Breaking apart rnea cross sectional

Breaking Apart RNEA – Cross Sectional

  • EPM is the lowest in the group

    • Many one-time items are included in calculations


Breaking apart rnea cross sectional1

Breaking Apart RNEA – Cross Sectional

  • EPM is the lowest in the group

    • Many one-time items are included in calculations

  • EATO of Starbucks is significantly above competitors

    • larger sales (2x to 3x), while 9% revenue came from licensed stores


Sales growth assumption

Sales Growth Assumption

Sales growth – 2014 Q1 conference call

5% - U.S. company-operated comparable stores

15% - U.S. licensed stores

8% - the Americas, 11% - EMEA, 25% - CAP

7% - Channel Development

  • Company-operated stores

  • Licensed stores

  • CPG, foodservice & other

  • Overall sales growth forecast?


Sales growth assumption1

Sales Growth Assumption

  • Sales growth of competitors also fluctuated a lot

  • No reason to sway from the average of Starbucks’ sales growth

  • Assume a 11% sales growth


Epat from sales

EPAT from Sales

  • Excluded one-time items

    • Litigation Charges, related tax benefit, and OCI items

  • Less volatile EPAT and EPM (compare)


Epm assumption

EPM Assumption

Assume

EPM: 10%


Eato assumption

EATO Assumption

EATO quite stable

Assume a 5.7 EATO


Parsimonious assumptions

Parsimonious Assumptions


Multi year forecasts

Multi-year Forecasts


Multi year forecasts1

Multi-year Forecasts


Multi year forecasts2

Multi-year Forecasts


Industry analysis concerns issues

Industry Analysis, Concerns & Issues

  • GMCR, MDLZ, SJM may not be sufficient to gather information on SBUX

    • Coffee is not the primary product of MDLZ and SJM

    • This leaves GMCR comparable to SBUX in terms of business and products, but not size (1/4x sales of SBUX)

  • Peer companies

    • Capture only the coffee production segment (“CPG, Foodservice, and other”) of SBUX

    • Omit store sales (both company-operated and licensed)

  • Macro effects on industry

    • Rising coffee bean prices

    • Political factors


Discounted cash flow model

Discounted Cash Flow Model


Discounted cash flow model1

Discounted Cash Flow Model

Use 2018

as base year


Discounted cash flow model2

Discounted Cash Flow Model


Discounted cash flow model3

Discounted Cash Flow Model


Discounted cash flow model4

Discounted Cash Flow Model

Share price (2/4/2014): $70.65

Market Cap: $53.4b

BV of Equity: $5.11b


Any questions

Any questions?


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