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By Jason Stipp | 12-02-2010 07:12 PM

Five Stories of Spending in the Market

Morningstar markets editor Jeremy Glaser on Starbucks' expenditures in China, consumers' Black Friday receipts, Pepsi's next push, and a great big price tag on Groupon.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to the Friday Five. It's "spending money" week on the Friday Five this week: five stories of open wallets and their impact.

Here with me with the Friday Five is Morningstar's Market's Editor, Jeremy Glaser.

Jeremy, thanks for joining me.

Jeremy Glaser: You are welcome, Jason.

Stipp: So what do you have for the Friday Five this week?

Glaser: Well, we're going to look at five examples where the cash is free flowing: at Starbucks; from consumers during Black Friday; from Pepsi; from Verizon; and finally from Google to buy Groupon.

Stipp: So, Jeremy, Starbucks is doing some activity in China. Is that going to brew up something good for them or are they going to face some headwinds there?

Glaser: At the very least it's going to be expensive for Starbucks. I think one of the things that the company has been struggling to find for years now is how to grow profitably. They grew a lot in the United States, had to cutback on some of those stores, and that's returned them to profitability, has created a lot of good returns for shareholders over the last year.

But now, they are looking again for growth, and they think that China is the place where they're really going to find it. They obviously have a lot of presence in the some of the larger cities, but they want to make a bigger push into secondary and tertiary cities and try to get people to make having coffee as part of their morning routine instead of just a place to go after work to maybe meet some friends and to have a quick cup of coffee.

So, this is going to be something that's expensive for them. It involves opening a lot of new stores; it involves a lot of marketing, a lot of branding campaigns, and they're going to have to be willing to put a lot of cash flow in there for a long time in order to get a return from it. Is it possible? I think absolutely; China is a market that's growing very quickly. I think consumer tastes are changing very rapidly, but it's something that is really going to be a big drain on cash flow.

Stipp: So, back here in the States, we're celebrating the one-week anniversary of Black Friday here. The numbers are starting to come in about how sales were over the last week and for Black Friday. What do they look like?

Glaser: They looked pretty good. It seems like people are willing to trample over each other to get to Target at 4 in the morning to make sure that they could get the hottest toy, they could get the hottest deal this year. People are excited about Christmas again. People are excited about doing their holiday shopping by getting out there and getting gifts for everyone. They love getting gifts for their friends and family.

So, I think that this is something that bodes well for retail for the month. I think it bodes well for consumer sentiment. I think it shows that, as we've discussed before and we've seen for a while that people are not in this terrified mode any more; they're willing to be out there. I think the Black Friday sales and Cyber Monday sales on Monday show that this is real. People are actually out there. So, before, we just hoped that they would, and now we're actually seeing those numbers come in.

Stipp: In corporate news, Pepsi, the last time they did some spending they were buying up some bottlers, but they also made another acquisition late in the week. What's the story behind that?

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