Despite economic pressure driven by the lingering Covid-19 pandemic and supply chain challenges, the world's biggest coffee companies continue to grow their sales. But profit margins and net income have come under pressure.
U.S.-based Starbucks (Nasdaq: SBUX) reported consolidated net revenues of $32.3 billion for the fiscal year, up 11% to a record high. Net income, however, fell 22% compared to the prior year while the operating margin slipped to 14.2%, down from 18.2% in 2021, pressured by labor costs, inflation, and Covid-19 restrictions in China.
The company forecasts fiscal 2023 global comparable growth to be in the range of 7% to 9%, according to comments made during its fourth quarter earnings call. Starbucks remains under the leadership of interim CEO Howard Schultz.
Keurig Dr Pepper (NASDAQ: KDP), headquartered in Burlington, Massachusetts, and Frisco, Texas, reported $3.62 billion in net sales for the year's third quarter, up 11.4% on an annual basis. Sales grew across all four of KDP’s business segments: coffee systems, packaged beverages, beverage concentrates, and Latin America beverages.. But net income plummeted 66% to $180 million. Operating margin fell to 10.9%, down from 24.5% during the same quarter in 2021.
Shortly after its earnings announcement, the company’s CEO Ozan Dokmecioglu resigned due to violations of the company’s code of conduct. Bob Gamgort, the company’s former CEO and executive chairman, is once again at the helm of the company as CEO. KDP reaffirmed its full-year 2022 guidance, anticipating low-double-digit net sales growth
Two large European players showed resilient performance in their most recent earnings reports.
Nestlé (OTC: NSRGY), based in Vevey, Switzerland, reported a 9.2% rise in sales for the first nine months of 2022 to CHF 69.1 billion ($73.1 billion). Coffee, a part of the company’s large portfolio, had high single-digit sales growth. Nestle has sustained its margins better than some competitors. The company forecasts its underlying trading operating margin (UTOP) at 17% for the year, down slightly from 17.4% in 2021. The company expects overall organic sales growth of approximately 8% for the full year.
“Our real internal growth remained resilient despite a high base of comparison and continued supply chain constraints, with limited demand elasticity,” Nestlé CEO Mark Schneider said in a press release.
JDE Peet’s (OTC: JDEPF), headquartered in Amsterdam, Netherlands, reported its half-year 2022 results in August. The beverage company’s organic sales increased 19.7% to 3.896 billion euros ($4.05 billion) in the first half of the year.
“We are successfully navigating through supply chain disruptions, pandemic effects and mounting inflation, while keeping course of our value creation agenda, centered around quality and inclusive revenue growth,” the company’s CEO Fabien Simon, said in a press release. “E-commerce sales kept growing organically at a double-digit rate, as did revenue in the U.S. and in China in home, while we are accelerating the store expansion there.”
JDE Peet’s gross profit for the quarter inched up 1.4%, but its earnings before interest and taxes (EBIT) fell 2.1%. JDE Peet’s forecasts double-digit organic sales growth in the remainder of the year despite the pandemic, inflation, and geopolitical unrest.
In the Chinese retail market, Luckin Coffee (OTC: LKNCY) has a made a comeback following its delisting from the NASDAQ in June 2020. Luckin reported $493.2 million in revenue in the second quarter of 2022, up 72.4% year over year. Its store level-operating profit margin was 30.6% for the quarter, up from 23.1% from the year prior. GAAP operating income margin was 7.3%, up from an operating loss in the same period of 2021.
Luckin management expects that pandemic restrictions will persist for the foreseeable future. But the company is growing its footprint anyway.
“During the second quarter, we had 615 net new store openings and entered 11 new lower-tier cities through our partnership stores and three new lower-tier cities through our self-operated stores,” said CEO and chairman Jinyi Guo, in a press release.
As of its second quarter, the Beijing-based company had 7,195 stores in the market, 4,968 of which are self-operated and 2,227 of which are partnership stores. Luckin now outranks Starbucks in its number of venues in China; the U.S. company has some 6,000 stores there.
In 2020, Starbucks announced a $130 million investment in a new roasting operation in China. That facility is expected to open in the summer of 2023, according to a comment from Schultz in the fourth quarter earnings call. Luckin Coffee has roasting facilities in Pingnan and Kunshan.