SBUX - Part three of a three act play!

The drama that is about to unfold for Starbucks is a show that we have seen many times before. The three companies that come to mind first are Wal-Mart, McDonald's, and Coca Cola. The first act is played out by the dominant founder overseeing a tiny company through a very rapid growth phase into a dominant global brand. Act II begins to unfold when the market forces and the competition alters the competitive landscape, the first financial misstep happens, and the company's valuation collapses. At this point in the play, shareholders get very angry and demand change. The patriarch of the company is reluctant or slow to change, which is the beginning of the end. Usually, the drama ends with there being two or three CEOs before the company gets it right.

It was not long ago that I wrote about the company's dramatic downturn in its fundamental performance, and how it's likely to create issues that it never had before as a public company--shareholder activism. While it's a small position, Trian has filed a 13F on Starbucks. Trian also owns large stakes in Kraft Foods, Cheesecake Factory, Tiffany & Co. and Cadbury-Schweppes.

Why Starbucks?

First, the global growth potential for the Starbucks brand is enormous.

Second, I believe that the Starbucks brand would be a valuable addition to many different global food and beverage companies. If the financial performance does not improve soon, losing control of the company is a real possibility. Additionally, many private equity firms would love to own the company.

From this point forward, every piece of bad news means we are one step closer to some real drama.

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