For companies like Starbucks Corp. (NASDAQ:SBUX) that rely on footprint expansion for top and bottom line growth, finding new markets and saturating them is the name of the game.
Thankfully, the world is a big place, and though it may seem like there is a Starbucks on nearly every corner of every major city in North America, growth in emerging markets is a key story line which I believe is currently underappreciated by the market.
Logically, some of this skepticism may be warranted. In most North American or European locations, high margins and access to properties in prime areas is taken as a given.
Growth in markets with underdeveloped infrastructure and political environments that may be more challenging pose risks that investors will undoubtedly shoulder, but the question of whether this risk is outweighed by the sheer growth available from growing middle-class populations in emerging markets makes this an interesting case study for investors.
Growth is slowing globally, and growth in countries like China is expected to taper off to levels not seen in more than a decade, adding uncertainty to Starbucks' decision to rapidly expand in the Orient.
That being said, over the long run, I believe margin expansion and earnings growth from emerging markets such as China will be the difference maker for an established North American giant, making this one of my top picks for companies to watch in the immediate to medium-term future.
Invest wisely, my friends.
