Wednesday, March 22, 2006

Starbucks Korea: The Numbers Up Close

Yes, It's another blog on Starbucks, and coffee consumption in Korea. What is suprising is the disclosure of their numbers.

Starbucks headquarters in the U.S. earns $. 20 for every $4 cup of coffee Starbucks Korea sells. The local Starbucks pays 5 percent of sales in royalties to headquarters, netting Seattle $4.56 million in royalties from Korea alone last year, up from $1.38 million in 2001. In total, it has taken as much as $15.14 million over the last five years in Korea.

Starbucks Korea is also paying dividends of $6 million, more than 60 percent of its net income of last year, it said in its latest audit report. As a result, Starbucks U.S., which owns half of Starbucks Korea, the other half being owned by Korean conglomerate Shinsegae, earns $3 million in dividends on top of the royalties.

And still the coffee franchise keeps expanding. It opened 34 new branches in Korea last year and recently opened its 154th branch in Seoul. Yet Seattle only ever invested $10 million. Starbucks Korea was established in 1997 with an equal investment of W10 billion from Starbucks U.S. and Shinsegae and has never increased its capital. Its assets, however, grew to $53 million last year. Fixed assets increased W6.7 billion last year and dependence on leverage is zero percent. What's more, Starbucks Korea's sales and net profits rose 26.6 percent and 89.9 percent from the year before to $91.25 million and $9.49 million in 2005. Its return on equity stands at a whopping 26.8 percent.

That is why complaints about the steep $4 price tag for what is after all merely a cup of coffee are getting louder. Starbucks Korea tries to head off such criticism by saying they hope “consumers take into consideration” that it is offering dividends to shareholders for the first time this year."


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