Value of a Starbucks Coffee | Business | Sarthak Ahuja

What’s the value of a Starbucks Coffee?
And whenever I say value... people seem to confuse it with Cost as well as Price.
The business does over Rs 1100 crores in revenue in India (FY23), has over 330 stores across 40+ cities...
And here’s something interesting... try taking a guess on how much it costs to make a Starbucks Cappuccino that is sold at a Price of Rs 275?
If I were to go by the company’s financials, the cost of material is roughly at 29% i.e. a cost of Rs 80 for one cup.
In a beverage of 237 ml:
👉🏼 I’d say maybe 150 ml of milk, which is around Rs 10
👉🏼 the container cup could go for Rs 10
👉🏼 a fabulous roasted and ground coffee worth maybe another Rs 10
👉🏼 and I’d say add another Rs 10 for consumables (sugar, napkins)
We’re still short of Rs 40.
I’d say Royalties to Starbucks would probably also go in here as another say Rs 20 worth on a cup... assuming less than 10% on the selling price... and that makes the cost Rs 60.
I can’t break down the cost further with lack of information... but we move on from here.
How much profit do you think the company would be making?
If you pull out financials of Tata Starbucks Pvt Ltd... you’ll see they made a Loss Before Tax of Rs 36 crores at a Rs 1100 revenue.
This is after 10 years of Starbucks in India and Rs ~600 crores invested by Tata itself in a 50:50 venture.
Now does this mean that the brand should have no value?
I wouldn’t say that.
Even with translation of the customer love they get in financial terms, the company should be turning profitable in FY24 is my best guess if you look at the trend of their increase in revenues and reduction in losses over the past few years.
And every big conglomerate understands that brands take years of investment to reach a point of scale where profits begin to come in.
And that’s what is value...
A numerical value on the future expectation of profits during the life of the business.
It changes from one person’s perspective to the other’s.
I could say Tata Consumer Products enjoys a 10X Revenue multiple, so would Starbucks also be worth 10 times its revenue?
Maybe, but most probably not.
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A Chartered Accountant with about 10 years of experience in areas of Tax Advisory, Startup Consulting, Fundraising, Audits, Deal Advisory, Business Modelling and contract CFO services.
Winner of the ISB Young Leader Award 2017 and the Best All Rounder, PGP Class of '17, Sarthak has also been published about in the leading financial newspapers such as The Financial Express as possibly the youngest Indian to have completed the courses of CA, CS and CMA along with a graduate degree in Financial & Investment Analysis from University of Delhi, all by the age of 23 years.

[@salonianand5744]

How can you quantify something that is subjective? Also does it show the real value of at all.. 😮