Starbucks is losing its prime spot among chains racing to meet China’s growing thirst for coffee.
Luckin Coffee has surpassed Starbucks as China’s biggest coffee chain by sales and units, company reports show, a comeback for the Chinese company after an accounting scandal that stalled its growth.
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Shares of PepsiCo Inc.
PEP,
rose 2.5% in premarket trading Tuesday, after the beverage and snack giant reported third-quarter earnings that topped consensus and raised its full-year guidance.
Net income rose to $3.092 billion, or $2.24 a share, from $2.702 billion, or $1.95 a share, in the same period a year ago.
Excluding nonrecurring items, core earnings per share of $2.25 were ahead of the FactSet consensus of $2.15.
Revenue grew to $23.453 billion from $21.971 billion, also ahead of the FactSet consensus of $23.413 billion.
“We are pleased with our performance as our businesses and associates displayed tremendous agility and resilience across geographies and categories in an evolving and dynamic environment,” Chief Executive Ramon Laguarta said in a statement.
Revenue at Frito-Lay North America rose 7%, while it was up 5% at Quaker Foods North America. PepsiCo Beverages North America rose 8%, while Latin America was up 21% and Europe up 2%.
Revenue for Africa, Middle East and South Asia fell 6%, while Asia Pacific, Australia and New Zealand and China Region’s revenue was up 4%.
For 2023, the company revised its core EPS guidance to $7.54 from $7.47 previously.
“For fiscal year 2024, we expect to deliver results towards the upper end of our long-term target ranges for both organic revenue and core constant currency EPS growth,” said the statement.
The company’s long-term target ranges for both organic revenue growth — 4% to 6% growth — and core constant currency EPS growth– high-single-digit percentage increase– remain unchanged.
The stock has fallen 11% in the year to date, while the S&P 500
SPX
has gained 13%.
Updated Oct 06, 2023, 2:51 am EDT / Original Oct 06, 2023, 1:15 am EDT
Consumer-staples stocks have gotten hit hard in recent weeks, and hasn’t escaped the carnage. With the steady-Eddie beverage and snack giant set to report earnings on Oct. 10, its stock could be ready to pop.
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Starbucks Corp. on Wednesday said former Chief Executive Howard Schultz is stepping down from its board of directors, capping a nearly 40-year career during which the company grew from a handful of stores in Seattle into a global coffee chain.
Schultz’s retirement from the board, which ends his involvement in the company’s leadership, took effect Wednesday and was part of a planned transition, the coffee chain said. Schultz stepped down as Starbucks
SBUX,
chief executive in March.
The company on Wednesday also said that it had elected Wei Zhang to its board of directors, effective Oct. 1. Zhang was most recently a senior adviser to Chinese e-commerce giant Alibaba Group
BABA,
and also held leadership positions at News Corp China and CNBC China.
Shares of Starbucks were down 0.7% after hours on Wednesday.
Starbucks said Schultz “will now turn his attention with his wife, Sheri, to focus on a range of philanthropic and entrepreneurial investments to create greater opportunity, accessible to all.” The company noted that the two were co-founders of the Schultz Family Foundation in 1996, and of the emes project.
Although he was not technically the founder of the coffee chain, Schultz became the modern face of it. Schultz joined Starbucks in 1982 as its director of operations and marketing. After a brief hiatus from the company, he returned in 1987 as chief executive and bought the business with backing from local investors, according to a biography on the Starbucks website. The chain went public in 1992.
As the chain’s footprint expanded beyond the U.S., Schultz stepped down from the CEO role in 2000 but returned in 2008. He retired from Starbucks in 2018, then came back as interim chief executive and board member last year.
Over those years, Starbucks has banked on China for international growth — even as that country’s economy remains turbulent following the postpandemic reopening. It also added food and cold and customizable drinks to its menus and built out its mobile-ordering infrastructure.
The company has branded itself as a progressive employer and a supporter of social justice. But over the past two years, the company, and Schultz in particular, have faced criticism over the handling of employees who were trying to unionize. Union members have accused the chain of unfair labor practices, retaliation for organizing and delaying contract negotiations, leading to deeper scrutiny from lawmakers.
“We hope this is an opportunity for Starbucks to change course and leave their union-busting behind them,” Starbucks Workers United, the union representing those workers, said Wednesday in a tweet.
Still, even as inflation has eaten into consumer savings, Schultz said coffee has remained an “affordable luxury” for many customers. And Starbucks management said that younger, loyal consumers and customizable drinks would help sustain demand.
According to a filing on Wednesday, Schultz will still be connected to the company in other ways. Starbucks said it would amend Schultz’s retirement agreement from 2018 and continue to provide him and his spouse with security services.
“The security services will be provided for a period of 10 years and will be evaluated on an annual basis,” the filing said. “In recognition of Mr. Schultz’s leadership as the company’s founder and chairman emeritus, the company will also provide Mr. Schultz with the reimbursement of his monthly healthcare insurance premiums.”
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A leading global health body has declared that the artificial sweetener aspartame, commonly used as an ingredient in diet soda, chewing gum and vitamins, may cause cancer.
But the World Health Organization’s report late Thursday also noted that people would have to be exposed to extreme amounts of aspartame — whether through diet, occupational exposure or other means — to be at risk.
So how much aspartame is too much?
It’s safe to consume up to 40 milligrams of aspartame per kilogram, or 2.2 pounds, of body weight per day, a WHO and Food and Agriculture Organizations joint committee of experts on food additives said. So, a person who weighs 154 pounds would need to drink nine to 14 cans of, say, Diet Pepsi or Diet Coke per day to exceed that level, assuming there are 200 to 300 milligrams of aspartame in each can.
“We’re not advising consumers to stop consuming [aspartame] altogether,” said WHO’s nutrition director, Dr. Francesco Branca. “We’re just advising a bit of moderation.”
The Food and Drug Administration has an even higher daily aspartame-exposure limit: 50 milligrams per kilo of body weight.
Even heavy aspartame users — Donald Trump, the former U.S. president, for example, drank a reported 12 cans of Diet Coke a day in his White House years — would struggle to consume that much of the sweetener in an average day.
But consumers should also note that a food being labeled “safe” is not equivalent to its being healthy. There has been plenty of research to suggest that sipping too many sweetened beverages, including diet drinks with artificial sweeteners, may be linked to health problems and elevated risk of death.
Aspartame is used in products that millions of people use every day, including Diet Coke and Diet Pepsi, Pepsi Zero Sugar and Coca-Cola Zero Sugar, the Mars Wrigley chewing gum Extra and some Snapple drinks, as well as some protein drinks, among thousands of others, by the Calorie Control Council’s count.
Aspartame was developed beginning in the mid-1960s by Skokie, Ill.–based G.D. Searle & Co., now a Pfizer
PFE,
subsidiary, which branded the sweetener NutraSweet. It secured ultimate FDA approval, after initial hiccups, for use in dry goods and then in carbonated soft drinks in 1981 and 1983, according to the Calorie Control Council.
The organization that this week labeled aspartame possibly carcinogenic was the World Health Organization’s cancer-research arm, the International Agency for Research on Cancer. The IARC said its aspartame declaration is based on “limited evidence” of cancer in humans, specifically a type of liver cancer called hepatocellular carcinoma.
What should consumers do with this aspartame news? “At least when it comes to beverages, our message is your best choice is to drink water or an unsweetened beverage,” said Dr. Peter Lurie, executive director of the Center for Science in the Public Interest, which previously nominated aspartame for IARC review.
More aspartame news on MarketWatch:
What is aspartame, and is it bad for you? Here’s what health experts say
Aspartame is possibly carcinogenic, according to WHO’s cancer-research agency
A leading global health body has declared that the artificial sweetener aspartame, commonly used as an ingredient in diet soda, chewing gum and vitamins, may cause cancer.
But the World Health Organization’s report late Thursday also noted that people would have to be exposed to extreme amounts of aspartame — whether through diet, occupational exposure or other means — to be at risk.
So how much aspartame is too much?
It’s safe to consume up to 40 milligrams of aspartame per kilogram, or 2.2 pounds, of body weight per day, a WHO and Food and Agriculture Organizations joint committee of experts on food additives said. So, a person who weighs 154 pounds would need to drink nine to 14 cans of, say, Diet Pepsi or Diet Coke per day to exceed that level, assuming there are 200 to 300 milligrams of aspartame in each can.
“We’re not advising consumers to stop consuming [aspartame] altogether,” said WHO’s nutrition director, Dr. Francesco Branca. “We’re just advising a bit of moderation.”
The Food and Drug Administration has an even higher daily aspartame-exposure limit: 50 milligrams per kilo of body weight.
Even heavy aspartame users — Donald Trump, the former U.S. president, for example, drank a reported 12 cans of Diet Coke a day in his White House years — would struggle to consume that much of the sweetener in an average day.
But consumers should also note that a food being labeled “safe” is not equivalent to its being healthy. There has been plenty of research to suggest that sipping too many sweetened beverages, including diet drinks with artificial sweeteners, may be linked to health problems and elevated risk of death.
Aspartame is used in products that millions of people use every day, including Diet Coke and Diet Pepsi, Pepsi Zero Sugar and Coca-Cola Zero Sugar, the Mars Wrigley chewing gum Extra and some Snapple drinks, as well as some protein drinks, among thousands of others, by the Calorie Control Council’s count.
Aspartame was developed beginning in the mid-1960s by Skokie, Ill.–based G.D. Searle & Co., now a Pfizer
PFE,
subsidiary, which branded the sweetener NutraSweet. It secured ultimate FDA approval, after initial hiccups, for use in dry goods and then in carbonated soft drinks in 1981 and 1983, according to the Calorie Control Council.
The organization that this week labeled aspartame possibly carcinogenic was the World Health Organization’s cancer-research arm, the International Agency for Research on Cancer. The IARC said its aspartame declaration is based on “limited evidence” of cancer in humans, specifically a type of liver cancer called hepatocellular carcinoma.
What should consumers do with this aspartame news? “At least when it comes to beverages, our message is your best choice is to drink water or an unsweetened beverage,” said Dr. Peter Lurie, executive director of the Center for Science in the Public Interest, which previously nominated aspartame for IARC review.
More aspartame news on MarketWatch:
What is aspartame, and is it bad for you? Here’s what health experts say
Aspartame is possibly carcinogenic, according to WHO’s cancer-research agency
Consumers are still showing signs of being highly sensitive to inflationary pressures and are shopping around to maximize their budgets, according to PepsiCo Inc. Chief Executive Ramon Laguarta.
“ ‘We’re seeing consumers shopping in more stores than before. They’re looking for better deals. They’re starting to look for optimization. They are going to channels that have better perceived value.’”
Laguarta told analysts on the company’s second-quarter earnings call on Tuesday that consumers are buying more in dollar stores or buying more in bulk or at wholesale clubs.
“So every segment of the consumer is making adjustments,” he said, according to a FactSet transcript.
Still, PepsiCo
PEP,
saw better elasticities in the three-month period, he said, referring to consumers’ sensitivity and response to higher prices.
Like many consumer companies, the snacks and beverages giant has been raising prices to combat its own higher costs in the current inflationary period. But, “we’ve been able to raise prices and consumers stay within our brands,’ he said.
See: U.S. inflation slows again, CPI shows, as Fed weighs another rate hike
One supportive factor is low unemployment, said Laguarta. Unemployment is currently low in developed and developing markets and is trending at a record low in Mexico and certain Asian markets, he said.
“So we’re seeing overall very good consumer behavior, especially when it refers to our categories, and that’s why we raised guidance on our top line and because of the first factor we raised guidance on the bottom line as well,” he said.
See also: ‘Greedflation’ is replacing inflation as companies raise prices for bigger profits, report finds
PepsiCo earlier posted better-than-expected earnings for the latest quarter and raised its fiscal 2023 guidance.
Some of PepsiCo’s more popular brands, including Lay’s, Doritos, Cheetos, and Ruffles, generated double-digit net revenue growth, along with smaller, emerging brands aimed at consumers seeking healthier choices, such as PopCorners, SunChips, Bare, and Off The Eaten Path, said the company.
The stock was up about 1% Thursday and has gained 2.4% in the year to date, while the S&P 500
SPX,
has gained 16%.
For more, see: PepsiCo’s stock gains after beating estimates in latest quarter and raising guidance again
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PepsiCo
beat earnings and revenue estimates in the fourth quarter, driven by higher prices. It increased its annual dividend, sending the stock higher in premarket trading Thursday.
The beverages and snacks giant (ticker:PEP) reported adjusted earnings per share (EPS) of $1.67 on sales of $28 billion. Analysts were expecting EPS of $1.65 on sales of $26.8 billion.
It’s been a year of contradictions.
The recession drum beats on, interest rates are rising, and the stock market has taken a tumble, and yet retail sales have risen 6.5% in the last 12 months, trailing a 7.1% increase in the cost of living.
There are other reasons people should consider cutting back on spending in 2023. The personal saving rate — meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money — hit 2.4% in the third quarter from 3.4% in the prior quarter, the Bureau of Economic Analysis said.
“There are signs that people are pulling back on certain expenditures. ”
That is the lowest level since the Great Recession and the eighth-lowest quarterly rate on record (since 1947). Adjusted for inflation, savings are down 88% from their 2020 peak and 61% lower than before the pandemic, according to government data. The personal saving rate hit 2.4% in November vs. 2.2% in October.
Are people buying stocks during a bearish market, and/or have they run out of their pandemic-era savings? Whatever the reasons, more judicious investing and spending decisions seem to be the most prudent approach — especially given the uncertain economic outlook for 2023.
There are signs that people are already pulling back on certain expenditures. Although retail sales are up on the year, they did decline 0.6% month-on-month in November to mark their biggest decline in almost a year, largely because of weak car sales.
About those new cars: New-vehicle total sales for 2022 are projected to reach 13,687,000 units, down 8.4% on the year, according to a joint forecast from J.D. Power and LMC Automotive. MarketWatch reporter Philip van Doorn explains all the reasons why you may wish to skip buying a new car in 2023, in addition to their rising prices.
So what else should you save your money on in 2023? MarketWatch writers give their verdict below.
During the pandemic, people loved to buy special purpose acquisitions companies, known as SPACs. In 2021, 613 SPACs listed on U.S. stock exchanges through initial public offerings, according to SPAC Insider. The year before, there were 248 SPAC IPOs. There had never been more than 100 of these before in a single year. There were SPACs associated with Donald Trump and Serena Williams. There were so many, that one was called Just Another Acquisition Corp.
SPACs exist as a means to take private companies public, and theoretically give these shell companies a faster and less regulatory burdensome means to access public capital. The U.S. Securities and Exchange Commission warned investors last April that so-called advantages of the SPAC process, such as reduced legal liability, may not prove to be so solid if tested in court.
The SPACs raised money even though they had no commercial operations or business, and tried to use the cash to buy something that did exist. But investors who bought SPACs that merged with private companies since 2015 have suffered losses of 37%, on average, a year after the merger, according to a recent study. The SPAC and New Issue ETF
SPCX,
has slipped 12% this year. The frenzy for SPACs has predictably gone bust. But if you see one, just stay away from it.
— Nathan Vardi
There are two main reasons not to invest in cryptocurrency in 2023, and neither has to do with the precipitous drop in value for most of the major coins in the last year, including but not limited to bitcoin
BTCUSD,
ethereum
ETHE,
and tether
USDTUSD,
Investors have long been conditioned to buy the dip and find value where others fear to tread, and then make money on the upswing.
Crypto is different because there’s no correlation to long-held market theories, and buying it amounts more to speculation than to investing. That might seem semantic, but if you look at financial planning holistically, then you treat investing as an exercise in risk tolerance — and crypto is all risk.
Which leads to the other main reason to avoid crypto in the next year: If you do buy it, there’s really no safe way to store it. There’s no federal insurance covering exchange failures and little cyber-theft protection for individuals. That leaves you on your own, which is not a good place to be with your money.
— Beth Pinsker
On the consumer front, if you’re really into virtual reality, there is nothing wrong with jumping on the new Meta Quest two and Meta Quest Pro headsets that were introduced in 2022 by Meta Platforms Inc.
META,
The problem is that you might feel like you bought a BlackBerry
BB,
phone in early 2007. Apple Inc.
AAPL,
is expected to finally show off what engineers at the Silicon Valley giant have been cooking up in a years-long project to jump into augmented and virtual reality, and consumers are expected to at least get a glimpse at Apple’s attempt this year, if not a chance to buy whatever the company produces.
The headsets don’t come cheap: Meta said earlier this year it was raising the price of Meta Quest 2 headsets by $100 to $399.99 (128GB) and $499.99 (256GB). The iPhone’s introduction 15 years ago changed the way people look at smartphones, and Apple’s expected jump into this field in 2023 could leave anyone who spent their money on a Meta Quest headset wishing for a new reality.
— Jeremy Owens
Struggling companies with business models that appear to some to be dying and/or struggling do not generally perform well in the stock market. But during the pandemic these companies often had stocks that soared. What drove them was social media sentiment, driven on platforms like Reddit, by a swarm of retail investors.
There was video game retailer GameStop
GME,
movie theater chain AMC
AMC,
and smartphone dinosaur Blackberry. AMC recently announced the sale of another $110 million in stock, adding to a total that has already exceeded $2 billion since the theater chain got swept up into meme-stock madness. CEO Adam Aron wrote on Twitter that the move put the company “in a much stronger cash position.”
GameStop recently reported its seventh consecutive quarterly loss and reiterated its goal of returning to profitability in the near term, but analysts have signaled that many challenges lie ahead. During the company’s recent third-quarter conference call, Chief Executive Officer Matt Furlong said that GameStop would be open to exploring acquisitions of a strategic asset or complimentary business if they were available “in the right price range.”
Buying meme companies like this worked for some in a booming stock market fueled by ultra-low interest rates. But we are now in a bear market with interest rates that are elevated. Corporate fundamentals are back in vogue. So are quaint investment ideas like cashflow. More likely than not, the days of buying meme stocks are over.
— Nathan Vardi
In recent years, Tesla Inc.
TSLA,
has stood alone as the best option for electric vehicles, while other manufacturers struggled to get production running. But in 2023, there should be many more types of electric cars available, at prices that are expected to trend downward as the year goes along. Teslas range in price from $46,990 for the Tesla Model 3 to $138,880 for the Tesla Model X Plaid.
With major manufacturers such as General Motors Co.
GM,
Ford Motor Co.
FORD,
Toyota Corp. and Volkswagen
VOW,
VLKAF,
jumping into the fray, and young Tesla wannabes like Rivian Automotive Inc.
RIVN,
Lucid Group Inc.
LCID,
and FIsker Inc.
FSR,
expected to start producing cars, consumers will have many more options for EVs.
Meanwhile, Tesla has done little to update the Model 3 since it was introduced in 2017, and has increased prices at a level that Chief Executive Elon Musk has admitted is “embarrassing” for a company that claimed to have a goal of mass-market pricing for EVs.
The average price of a new EV is $64,249, while a new gas car is $48,281, according to Liz Najman, a climate scientist and communications and research manager at Recurrent Auto, an EV research and analytics firm focused on the used-vehicle market. After years of not having much choice beyond Tesla for EVs, 2023 appears to be the year that changes.
— Jeremy Owens
