Is Starbucks A FinTech?

Is Starbucks A FinTech?

Is the mega coffee giant technically a fintech now that they handle so much finance in their operations? And uses tech!

Starbucks is the largest coffeehouse chain in the world. Founded near the historic Pike Place Market in Seattle by Jerry Baldwin, Gordon Bowker and Zev Siegl in  1971. In addition, Starbucks’ name became inspired by the seafaring classic tale “Moby Dick”, inspired by early  coffee traders that crossed oceans to transport this favorite morning beverage.

Coffee enthusiast  Howard Shultz joined the Starbucks team in 1981 and his leadership led the massive expansion  of the coffeehouse around the world. To sell products, Starbucks uses a network of company operated stores and licensed stores such as convenience stores, grocery stores, specialty stores  and warehouse clubs. Starbucks also sells its products on their website (Starbucks, n.d.).

Financial Information:  

Four years of data were collected about Starbucks, 2018, 2019, 2020 and 2021, Starbucks had begun declining in profitability in 2019 and inevitably was hit by the corona virus lockdowns in  2020. However, Starbucks quickly recovered to 2018 levels and according to CEO Kevin  Johnson, the company delivered record performance in the third quarter with revenue up by 10 percent in the United States market compared to 2019. Despite rising costs and labor, Starbucks  earnings rebound has been dramatic. Starbucks is offsetting pressures by raising the prices of its  products and moving toward premium coffee.

A year ago, it was facing a 17 percent operating  loss while in 2021 its operating margin had jumped to 20 percent of sales (The Motley Fool,  2021). 

Starbucks total assets have been going up for the last few years, particularly skyrocketing in  2020 and 2021. This is attributed to new healthcare packages for employees, expanding rewards  programs and the expansion of drive-thrus. 2019 saw Starbucks net income begin to decrease but  due to COVID-19, Starbucks net income decreased dramatically. However, Starbucks quickly  adapted to the pandemic, focusing on repeat customers with its rewards program as well as  rapidly expanding its drive-thrus so customers can safely order from their cars as well as comply  with COVID-19 protocols (Meisenzahl, 2021). Finally, I calculated ROE and ROA. The ROE  tells us that the shareholders are losing value rather than gaining which is an alarming sign.  However, ROA is in good shape but needs to recover to historical levels.  

Starbucks 10-K Filing 

Starbucks objectives include remaining one of the most recognized brands in world, expand its existing market within the US  and the world, particularly China, continue innovating new product offerings, and commit to a global social impact strategy that benefits communities it operates in, its employees and ethically  sourcing its coffee.  

There are many risks that Starbucks faces as a company. The first risk is the economic  conditions in the US and international markets could affect Starbucks business and financial  results. COVID-19 hurt Starbucks quite badly with its Chinese stores still suffering corona virus  related consequences and store closures. Corona virus also created disruptions with the supply  chain, with many products customers love being out of stock for weeks due to shortages  (Meisenzahl, 2021). Another risk is Starbucks reliance on information technology, particularly  for its rewards program. If the Starbucks application glitches, unhappy customers will complain  because they are drawn to the Starbucks rewards program that is tied to the app, impacting the  reputation of the brand.  

Management highlighted some key financials in their discussion section. According to  management, Starbucks total net revenues have increased from $23.5 billion in fiscal 2020 to  29.1 billion (an increase of 24 percent) in fiscal 2021. Starbucks operating margin increased to  16.8 percent in 2021 from 6.6 percent in 2020. This was mainly due to business recovery,  catastrophe and service pay for employees and store partners. 

Starbucks is performing better than it has in years mainly due to its expansion of its  rewards program and its new drive thru locations. What is not going well is its supply chain  shortages as it is upsetting many Starbucks customers that their favorite products are not always  available to them. I believe Starbucks will stay in business for the next 20 years because of its  loyal, repeat customers (SEC, 2021).  


Like just about every company with a brick-and-mortar retail presence in the United  States, Starbucks’ shares underperformed the S&P 500 in March 2020. Shares of Starbucks fell  16.2% in March as the coffee giant scrambled to respond to the COVID-19 outbreak.

In response, Starbucks CEO Kevin Johnson implemented a series of protective measures.

Such as  doing takeout and delivery only, all employees wearing masks and protective pay for employees. That became diagnosed with COVID-19. Despite the initial drop in March 2020, Starbucks  continued to grow, particularly in North America. Starbucks expanded its drive-thru locations  which have had high volume orders. Furthermore, the mobile order pay method where customers  pick up their online order is also popular. These two methods accounted for 70 percent of  transactions since the pandemic began. Starbucks in currently the #4 food and drink store on both Google and Apple Pay. The stock also increased due to Starbucks tapping into its repeat buyers, which make up most of their buyers, through extensive reward programs.

Starbucks is tapping  into its existing customer base through MOP, a heightened focus on drive-thru, and the power of  its rewards program. By encouraging customers to spend more per transaction and increase the  frequency of their visits, it’s paving a path toward higher profitability, independent of growing  store count. 

Starbucks is committing $20 billion toward share repurchases and dividends over the next  three years. The company just raised its annual dividend to $1.96 per share, representing a nearly  10-fold increase in its payout since 2010, this being the 11th consecutive year Starbucks raised  its dividend.  

Initially, my recommendation to investors was to buy Starbucks stock. However, I realized although Starbucks stock is generally high performing, the negative ROE cannot be ignored. Until Starbucks fixes its ROE, it is not worth it for investors to buy shares. I suggest  waiting and seeing how Starbucks performs in 2022 as it seems it is on its way to recovery. I  suggest investing if the stock goes down to $90 from its current $114. 

Sources DAQ%3A.IXIC items-2021-6 20211003.htm#i6f0f6353eb914b2d80f77509ec853b83_19 margin/?sh=74160657659b company-according-to-employees-12

Is Starbucks A FinTech?