Starbucks Goes South with a Big Surge in Latin America

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Starbucks in Costa RicaThere may seem to be a Starbucks (SBUX) at most high-traffic locations, but you were out of luck trying to satisfy a Frappuccino craving in Costa Rica -- until Wednesday morning.

Starbucks closed out its most recent quarter with 17,420 stores, with more than 560 locations throughout Latin America. This week the java giant is setting up its first store in Costa Rica. It'll be in the Escazu neighborhood in San Jose.

The fast-growing chain has to occasionally tweak its menu as it establishes itself in new territories, but Costa Rica will be getting the company's full menu of hot and cold espresso beverages, Frappuccinos, brewed coffee servings, Tazo teas, and aromatically pleasing food items.

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The company is no stranger to the Costa Rica. Even though Starbucks gets most of its Arabica coffee beans from Colombia, it's been sourcing beans from Costa Rica since its founding in 1971.

However, entering a new country isn't the only Latin American move that the baron of baristas is making this week.

Starbucks is also opening a Farmers Support Center in Colombia to assist harvesters, adding to the existing centers it has set up over the years -- one in Costa Rica in 2004 and another in Rwanda in 2009. These hubs staff agronomists and quality experts to work directly with the area's coffee farmers. Starbucks is planning on opening its next center in China next year.

A Latte Potential

Starbucks hasn't been very aggressive in the Latin American market from which it sources most of its beans. The same can be said of the Europe, home of the old-school coffeehouses that inspired the company's original concept.

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Starbucks Goes South with a Big Surge in Latin America

Nucor (NUE)  A company in a cyclical industry like the steel-making business could certainly be excused for paring down its workforce during tough times. During the Great Recession, Nucor's revenues were cut in half -- and yet the company didn't lay off a single worker.

Following a plan instituted by his predecessor, F. Kenneth Iverson, CEO Dan DiMicco has the company carry out a "pain-sharing" program when business is slow. Executives are the first to take pay cuts -- and they can be steep. After that, hours are reduced. That can hurt, but in the end, everyone keeps their jobs.

Whole Foods (WFM)  Sure, it's great that this grocer is encouraging Americans to eat smarter, but that alone isn't enough reason to celebrate it. The presence of Whole Foods has encouraged the proliferation of organic foods, which are unquestionably better for the environment. The company's color-coded seafood sustainability index encourages customers to consume responsibly, and it has taken huge steps to encourage sustainable farming in Costa Rica.

But it doesn't end there: Whole Foods also has an admirable approach to salaries. Co-CEO and founder John Mackey gets a $1 salary and took home just $78,000 in 2011 in accrued vacation time; no executive is allowed to earn more than 19 times the average worker's total pay.

Berkshire Hathaway (BRK-B)  Warren Buffett's baby makes it on to the list for how it's run: with an uber-long-term horizon and the utmost respect for shareholders. Arguably the greatest investor the world has ever seen, Buffett has also set the standard for transparency when it comes to communicating with the financial community.

Case in point: the David Sokol fiasco of early 2011. Sokol, one of Buffett's top charges, convinced Berkshire that Lubrizol -- a chemicals company -- was worthy of acquisition. The problem: Sokol held a substantial amount of Lubrizol shares that stood to appreciate upon the acquisition, and he didn't disclose the holding.

Sokol left the company around the time this information became known. Buffett was quick to give a full account of the situation, baring all for outsiders to see -- including his later bewilderment with Sokol's behavior.

Starbucks (SBUX)  Sure, it's easy to see this coffee king as a symbol of all that's wrong with corporate America. Satirical newspaper The Onion once joked that the stores were so ubiquitous, a new Starbucks was being opened in the restroom of an existing Starbucks.

All jokes aside, the company has been a model employer and partner with suppliers. Any employee who works just 20 hours per week is given health-care coverage. During the economic downturn, the company spent more money on this benefit annually than it did on all the coffee it bought. Starbucks has spearheaded the move for fair-trade coffee as well. It is the world's largest purchaser of fair-trade coffee, and it often pays above market value to its producers in developing countries.

And this past year, CEO Howard Schultz launched a drive to kick-start American job growth. In the program dubbed "Create Jobs for USA," the company collects donations from customers. All of the donations are poured into a fund that facilitates micro-loans to spur small-business job growth.

Costco (COST)  Competitor Walmart (WMT) has been in the headlines a lot lately. Whether it's for bribing officials in Mexico or not allowing employees to form unions, there seems to be a dark cloud hanging over the company. So why doesn't Costco get any bad press when the majority of its employees don't have union representation either?

It's actually quite simple: The company believes in its employees, and it backs that up with its actions. Employees are paid an average of $17 per hour and have generous health-care and retirement benefits -- two things Walmart employees certainly can't claim.

And customers are huge beneficiaries as well. Costco has razor-thin margins -- which means nearly every penny of savings Costco can squeeze out using its size and efficiency is passed on to customers. The company's profits, in fact, are almost entirely accounted for in membership dues -- not sales. The approach has worked out well for shareholders, too; including dividends, Costco shares have returned 131% over the past decade, doubling what the larger market has offered up and quintupling Walmart returns.

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However, the company seems ready to make up for lost time -- at least as it pertains to expansion through Latin America.

Starbucks took control of its Brazilian operations two years ago and now plans to add hundreds of stores in country. It will team up with a joint-venture partner to open at least 300 new stores in Argentina and Mexico over the next three years.

Starbucks has a passport, and it's not afraid to use it.


Motley Fool contributor Rick Munarriz does not own shares in any stocks in this article. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks.


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