AMDP Investment Proposal

To: Clark Hansen, CEO of AMDP

From: Ramneek Singh, Research and Development Analyst 

Date: March 8, 2024

Subject: Investment Opportunity in Starbucks Corporation


As a Research and Development Analyst at Anima Mundi Development Partners (AMDP), my job is to make sure that we unearth and invest in the hottest companies that turn a profit for AMDP. However, in today's world, the social and environmental impact should also be considered along with profits. The Information Age has exposed many companies that fail to follow socially and environmentally friendly business practices. It has taken a massive toll on many companies’ reputations and financial statements. 


With that being said, I urge AMDP to NOT invest in the Starbucks Corporation due to the company's complete disregard of socially and environmentally friendly business practices. In this memo, I will:

  • Review AMDP's Guiding Principals
  • Give an overview of the Starbucks Corporation
  • Present opinions from industry experts and news sources on Starbucks' operations
  • Provide a recommendation regarding AMDP's investment into Starbucks


AMDP Guiding Principles

AMDP prides itself on doing business with economically profitable companies, promoting social good, and creating a sustainable environment. It does so using four major principles that AMDP has adhered to since the very beginning.

 

Triple Bottom Line

AMDP follows the Triple Bottom Line principle which entails three things:

  • People: An organization's commitment to positively impacting commitment.
  • Planet: An organization's effect on the planet.

  • Profit: The financial returns an organization generates for shareholders. (Miller, 2020)

AMDP considers its overall impact in the region in which it operates rather than simply turning a profit and disregarding the environment in which AMDP is situated.


Corporate Social Responsibility

Corporate Social Responsibility is the idea that a business has a responsibility to the society that exists around it. Firms that embrace CSR are typically organized in a manner that empowers them to act in a socially responsible way to positively impact the world. (Stobierski, 2021)


An individual has a responsibility to contribute to and improve the society around them. Companies should also be held to the same standard and thus they too have a responsibility to better those around them. 


Social Enterprise

A social enterprise is a corporation that has a revenue-generating business that has a socially good mission and seeks to help individuals entering or returning to the workforce. (The Annie E. Casey Foundation, 2020)


Carbon Footprint

A carbon footprint is the total carbon output that is generated from one's actions. It can be calculated by summing all the greenhouse gasses, measured in tons, that are produced through a person's or corporation's actions such as traveling and even dietary habits. (The Nature Conservancy)


It's important that everyone minimize their carbon footprint to combat climate change. As greenhouse gasses build up, they end up heating up the planet and contributing to global warming. An increase in global temperatures means more severe climate disasters and to curb such travesties, it's important to create a small carbon footprint on an individual level.


Starbucks Corporation Overview

Background

Starbucks was founded in 1971 in Seattle where it began selling roasted coffee, tea, and spices from around the world to its customers. In 1982, Howard Schultz entered the first Starbucks, became enamored with the company, and took the role of director of retail operations and marketing. A year later, while visiting the coffee houses in Milan, he was inspired to make Starbucks feel like an authentic coffee house. After adopting this new marketing philosophy, Starbucks started to grow and by 1996, the company already had stores in multiple different states including California. Over the next two decades, Starbucks grew immensely and became the coffee giant we know today. (Starbucks.com)


Financials

Some of the financial data of Starbucks shows that:

  • It made $36.69 billion in revenue in 2023 and had a revenue per share of 32.07 dollars.
  • The company has $3.38 billion in cash and has 24.49 billion dollars of debt. 
  • The stock price has moved by 28.53% from where it was 52 weeks ago.
  • Starbucks has $102.98 billion market cap, second only to McDonalds. (Yahoo Finance)

Starbucks claims

The Starbucks corporation has made numerous claims regarding sustainability and being environmentally conscious. The company has set a target of reducing its carbon, water, and waste footprint by half by the year 2030. (Starbucks.com) Additionally, the company plans on moving towards reusable packaging and investing in regenerative agriculture as well as water replenishment in its supply chain by 2030. In March of last year, the company committed $50 million towards its goals. (Starbucks Stories & News, 2023) 


Additionally, the company also announced a $25 million investment into the WaterEquity's Global Access Fund IV which helps bring access to clean drinking water to underprivileged areas around the world. 


Starbucks also aims to expand its plant-based menu options along with the rest of the changes the company has committed itself to to combat climate change and promote healthier eating habits.


Expert Opinions

Starbucks, at the surface level, appears to be a solid company with a commitment to a sustainable future but when it comes to investing, it is important to look deeper into their past as well.


Opinion #1

In a report published by the Ethical Consumer, a British not-for-profit research organization that researches and presents its findings on the practices of businesses, the Starbucks Corporation fails when it comes to upholding good, ethical standards.

According to the report, the company operates in countries that are "...run by regimes that are known to have poor practices when it comes to human rights including China, Mexico, the Philippines, and Turkey."


Along with having operations in countries with poor human rights track records, the report alleges that in Guatemala, children were working 40-hour weeks on a farm that supplied Starbucks. Not only does Starbucks do business with farmers who ignore child labor laws, but the company also works with a Brazil-based supplier who cut labor rates for one of the poorest areas in the country. (The Ethical Consumer)


It isn't just other countries' laborers that Starbucks is known to exploit. It has been criticized for union busting in the United States. The company fired employees who attempted to unionize, further proving that Starbucks does not treat its employees well and has no regard for exploiting labor overseas. 


Opinion #2

Beyond unfair labor practices and union busting, Starbucks has also come under fire for tax evasion.


It's no secret that companies try to find every loophole possible within the tax code to avoid paying more than they have to. But, according to a Reuters news report, Starbucks had been "...telling investors that its British unit was highly profitable while telling authorities the unit was loss-making, and thereby not liable for tax." (Reuters, 2012)


The corporation claims that it pays all of its taxes but in recent years, Starbucks took flak in the United Kingdom for evading taxes. It paid just £5.4 million, approximately $7 million, in taxes after making £95 million, $122 million, in gross profit. The company's shady tax conduct has not improved since Starbucks consistently falls into legal trouble with the UK government over not paying the correct amount. (Guardian, 2022)


Upon reviewing how ethically questionable Starbucks is with their unfair treatment of workers and disregard for the UK tax code, it is safe to conclude that Starbucks does not intend to follow good business practices.


Recommendation

The Starbucks Corporation is a very successful business with strong financials to back it up. They are the third largest food establishment in the world with 36 million locations worldwide and have the second largest market cap in the food service industry. Historically, they have been a good company to invest in from a financial point of view. Their stock shows consistent growth and the company also pays dividends to its investors every quarter.


However, Starbucks has always been in the news for their business malpractices across the world. They do not uphold ethical standards, operate in countries that do not respect human rights, and attract negative attention through their actions. I strongly recommend that AMDP SHOULD NOT INVEST in the Starbucks Corporation.


Investing in such a company would be financially beneficial and Starbucks has committed itself to the fight against climate change but it does not do enough when it comes to being a fair, ethical business. This would attract negative attention to AMDP and harm our brand image and business.


Thank you,

Ramneek Singh

Research and Development Analyst

Works Cited

“About Us: Starbucks Coffee Company.” About Us: Starbucks Coffee Company, www.starbucks.com/about-us/. Accessed 8 Mar. 2024. 

The Annie E. Casey Foundation. “What Is a Social Enterprise?” The Annie E. Casey Foundation, 10 Dec. 2020, www.aecf.org/blog/what-is-a-social-enterprise. 

“How Ethical Is Starbucks Corporation?” Ethical Consumer, 8 Feb. 2024, www.ethicalconsumer.org/company-profile/starbucks-corporation. 

Starbucks Commits over $50 Million to Sustainable Waste and Water ..., stories.starbucks.com/press/2023/starbucks-commits-over-50-million-to-sustainable-waste-and-water-funds-toward-a-resource-positive-future/. Accessed 9 Mar. 2024. 

“Starbucks Corporation (SBUX) Valuation Measures & Financial Statistics.” Yahoo! Finance, Yahoo!, 7 Mar. 2024, finance.yahoo.com/quote/SBUX/key-statistics/. 

“Starbucks Pays Just £5m UK Corporation Tax on £95m Gross Profit.” The Guardian, Guardian News and Media, 30 Mar. 2022, www.theguardian.com/business/2022/mar/30/starbucks-uk-corporation-tax-profit-administrative-expenses-royalties. 

“Striving for a Sustainable Future: Starbucks Coffee Company.” Striving for a Sustainable Future: Starbucks Coffee Company, www.starbucks.com/responsibility/planet/. Accessed 8 Mar. 2024. 

“The Triple Bottom Line: What It Is & Why It’s Important.” Business Insights Blog, 8 Dec. 2020, online.hbs.edu/blog/post/what-is-the-triple-bottom-line. 

UK Committees to Examine Starbucks Tax Strategies | Reuters, www.reuters.com/article/idUSBRE89E0F0/. Accessed 9 Mar. 2024. 

“What Is Corporate Social Responsibility? 4 Types.” Business Insights Blog, 8 Apr. 2021, online.hbs.edu/blog/post/types-of-corporate-social-responsibility. 

“What Is Your Carbon Footprint?” The Nature Conservancy, www.nature.org/en-us/get-involved/how-to-help/carbon-footprint-calculator/#:~:text=A%20carbon%20footprint%20is%20the,highest%20rates%20in%20the%20world. Accessed 8 Mar. 2024. 


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