From Adweek · Robert Klara · · 1m
Starbucks Eyes Chipotle Acquisition
Starbucks reportedly explores buying Chipotle but faces operational challenges.
In brief
Starbucks reportedly explores buying Chipotle but faces operational challenges. Starbucks has reportedly considered purchasing Chipotle but investors worry about the operational burden of a $39 billion company with 4,200 locations. Originally reported by Adweek.
Starbucks Considers Chipotle Buy
Starbucks reportedly explored a takeover of Chipotle, a fast-casual Mexican chain with a $39 billion market cap and north of 4,200 locations.
Investors Worry About Scale
Investors reportedly fear taking over a $39 billion company with 4,200 locations would be too big an operational burden for Starbucks' turnaround.
Starbucks Turnaround Status
Starbucks CEO Brian Niccol said the turnaround isn't complete, admitting he underestimated the business scale and needs faster digital and menu improvements.
“I probably underestimated the scale of the business that Starbucks is”
Chipotle's Strong Q2 Performance
Chipotle reported Q2 revenues up 9.3% to $3.3 billion with comp sales up 2.2%, but faces price perception issues as gas prices exceed $4 a gallon.
Potential Merger Challenges
A merger would create a $50 billion behemoth with no coffee or burrito overlap, but could risk declining if management attention is diverted.
“the diversion of management attention, combined with weakening brands, may risk creating a combined entity that continues to decline”
In short
Starbucks has reportedly considered purchasing Chipotle but investors worry about the operational burden of a $39 billion company with 4,200 locations.
