Singapore Investors Take Note: Here’s What Starbucks Corporation Has To Say About China’s Growth

Coffee chain powerhouse Starbucks Corporation had held its annual shareholder’s meeting in March this year and shared some fascinating insights about its views on China.

Starbucks may be a U.S.-based company, but it has targeted China as one of its next big growth markets. The company currently has over 2,000 stores in the giant Asian nation scattered across 100 cities and has plans to open roughly 500 stores per year over the next five years.

In Starbucks’ shareholder’s meeting, Howard Schultz, the company’s chairman and chief executive, said (link opens to video) the following:

“Howard Schultz and Starbucks Coffee Company, are bullish on China.”

As he made that statement, the following information was displayed:

Starbucks screenshot
Source: Starbucks’ presentation (link opens PDF)

So, there are few noteworthy things in the slide. First, it’s estimated that there will be a doubling of China’s middle class from 300 million people in 2016 to 600 million people in 2022. That’s 300 million people in total growing in affluence over the next eight years; the potential number of people that could be added to China’s middle class is nearly the same size as the U.S.A’s current population.

Second, China’s gross domestic product (GDP) is pegged to expand by between 6% and 7% annually from 2016 to 2020. For perspective, Singapore’s GDP had grown by just 2.9% in 2014 and 2.0% in 2015.

Third, the consumer economy in China is expected to hit US$6.5 trillion in size by 2020. Again, for some perspective, Singapore’s GDP was ‘just’ US$308 billion (or US$0.3 trillion) in 2014, according to data from the World Bank.

These may be important numbers for investors in Singapore to note. And that’s because there are many companies in Singapore’s stock market that have significant exposure to China. I’m not talking about the S-Chips here, which are China-based companies listed in Singapore – I’m talking about companies that are based in Singapore or other parts of the world that are doing business in China.

Food and beverage retail outfit BreadTalk Group Limited (SGX: 5DA), logistics facilities provider Global Logistic Properties Ltd (SGX: MC0), tourism asset owner Straco Corporation Ltd (SGX: S85), and palm oil producer Wilmar International Limited (SGX: F34) are just four of such companies in Singapore’s stock market among many others.

Breadtalk, GLP, Straco, Wilmar revenue table
Source: S&P Global Market Intelligence

As the table just above shows, the quartet had sourced at least 31% of their revenues from China in their last completed fiscal year.

A Fool’s take

Not every company that does business in China will win even if China’s economy goes on to display great growth over the years. But as investors, it can be worth keeping track of developments in a company’s major geographical markets.

In the eyes of Starbucks, China is a country to be bullish on over the long-term.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Starbucks Corporation and Straco Corporation.