GRANDE AMBITION
Ackman stake gives Starbucks a whole latte love
Bill Ackman has spilled the beans on his latest investment — and it’s all about your coffee addiction.
The activist hedge-fund billionaire unveiled a $900 million stake in Starbucks at an investor conference Tuesday, a massive bet that coffee is increasingly becoming the beverage of choice as consumers ditch sugary sodas.
Central to Ackman’s thesis is drinkers’ round-the-clock cravings for the caffeinated beverage once thought of as a morning drink. Teens also dig the stuff, Ackman noted in a 43-slide presentation, pointing to how coffee is gaining market share over soft drinks.
“Frequent consumption creates a loyal customer base and trade-up potential,” Ackman said.
News of Ackman’s investment gave the sleepy stock a much-needed jolt as the shares closed up 2.1 percent, at $57.71.
The giant coffee chain has been dogged by bad publicity this year — most notably the racial firestorm that ensued after a barista in Philadelphia called the police on two black men in April.
Starbucks has since been in damage-control mode, with Chief Executive Kevin Johnson going on an apology tour and changing its policy in May to give access to all — regard- less of whether or not they bought something.
In June, the shares took another hit when Chairman Howard Schultz announced plans to step down. Weeks later, Starbucks’ chief financial officer and deputy general counsel retired.
In July, Starbucks lowered its full-year guidance for samestore sales following a slowdown in growth in China.
Despite the slowdown — and despite the prospect of crackdowns as China retaliates against President Trump’s tough tactics on trade — Ack- man sees huge opportunities in China.
“China will become increasingly important to the value of Starbucks over time as it represents Starbucks’ single-largest unit growth opportunity,” Ackman said, adding that China could eventually eclipse Starbucks’ US business.
Starbucks acknowledged Ackman’s investment Tuesday, noting that feedback with shareholders helps it “fulfill our aspirations as a growth company.”
“We look forward to maintaining a productive dialogue with Mr. Ackman as we do with all of our shareholders,” the company said in a statement.
Starbucks is Ackman’s latest foray in the food and beverage space following his investment in Chipotle Mexican Grill two years ago. Ackman’s Pershing Square hedge fund also has stakes in Burger King parent Restaurant Brands and Oreo cookie-maker Mondelez.
Pershing Square’s publicly traded fund is up 15.8 percent this year after three consecutive years of losses. In addition to a disastrous $1 billion short bet against Herbalife, Ackman had gotten slammed by a $4 billion loss on his investment in scandal-ridden pharma giant Valeant.
Ackman hinted at the Starbucks investment on an investment call in August, adding that the new play accounted for nearly 10 percent of Pershing Square’s $8.4 billion portfolio.
At the time, Ackman said the mystery investment is “quite undervalued” and has “lots of opportunity for improvement.”