2024-04-04 07:43:01 ET
Starbucks (NASDAQ: SBUX) and Luckin Coffee stock prices have come under intense pressure this year amid rising robusta coffee prices and demand. SBUX shares crashed to a low of $88.50 on Thursday, its lowest level since October 2023. It has crashed by over 21% from its highest point in 2023, meaning it has moved into a deep bear market.
Luckin Coffee (LKNCY) stock price is doing much better than Starbucks. It has risen by over 28.6% from its lowest level this year and it remains 35% below the highest level in December last year.
Luckin Coffee vs Starbucks stocks
Robusta coffee price is soaring
Starbucks and Luckin Coffee shares have been on edge this year. Investors are watching the performance of robusta coffee prices. According to Barchart, the price of robusta has soared to the record high of $3,745, much higher than the 2021 low of $1,176.
Sadly, coffee price has more room to run because of the ongoing supply concerns. Countries like Vietnam and Indonesia are going through one of the worst heat waves in recent years. As a result, their exports are expected to drop by more than a fifth this year.
Other countries like Kenya, Uganda, and Ethiopia are also not growing their coffee production because of the recent price declines.
Coffee, like cocoa, is a more complicated commodity in that it cannot be replaced easily. That means that farmers cannot rush back to plant coffee to take advantage of the rising prices. On average, a coffee tree takes a few years to start production.
Rising coffee prices will have an impact on restaurants like Starbucks and Luckin Coffee, which are among the biggest buyers globally. In this case, they will need to boost prices at a time when many people are complaining about inflation.
Robusta coffee price
China concerns remain
Starbucks stock price has also plunged after the company warned about a slowdown in China , where it is seeing strong competition. The company said that its total revenue rose by 8% in its Q1 to $9.4 billion. Its comparable same-store sales rose by 5%.
However, the company warned that its Chinese business was slowing as competitors like Luckin Coffee jump. Its CEO said :
“The market is going through a transition as we see an increase in mass market competitors, which we believe will shake out over time.”
This competition is real. For example, Luckin Coffee has gained over 13,275 stores in China compared to Starbucks’s 6,800.
Luckin is also seeing stronger revenue growth as it continues adding thousands of stores. It added 2,975 stores in the fourth quarter, leading to an impressive 87.3% full-year revenue growth. Its self-operated stores.
There are concerns that Luckin and Starbucks’s revenue growth in China will slow down this year as the country’s economy weakens.
Still, in the long term, there is a possibility that the two stocks will bounce back. They are all well-known brands that serve millions of customers per month. Starbucks, in particular, operates as a bank, thanks to its rewards program, which has over 30 million members.
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