MKM Partners stays bullish on Starbucks despite unionization trends

• A Starbucks (NASDAQ:SBUX) store in Buffalo has become the first location in the country to unionize after employees voted by a margin of 19 to 8 to join the Workers United Union. Two other stores in the region also voted on Thursday, but one said no, while results at the third location weren't conclusive. Never in the coffee chain's 50-year history has it relied on union workers to serve up its lattes among its 9,000 corporate-run stores across the U.S.
• What it means: Analysts are sizing up what kind of tipping point could be in store as this is the first-ever labor foothold to hit Starbucks. Three more locations in Buffalo are also heading towards union elections, as well as another store in Mesa, Arizona that just filed for a vote. The fact that there was also a win in the restaurant industry - where there are almost no unions - could heat up labor movements and advocacy across the country.
• The union drive has preoccupied Starbucks executives for months and the company even unveiled a wage increase in October that would raise the average barista's salary to nearly $17 an hour (from $14) by next summer. "This win is the first step in changing what it means to be a partner at Starbucks, and what it means to work in the service industry more broadly, said Michelle Eisen, a barista who works at the now-unionized Elmwood location in Buffalo. "With a union, we now have the ability to negotiate a contract that holds Starbucks accountable to be the company we know it can be, and gives us a real voice in our workplace."
• Brett Levy of MKM Partners noted that unionizing move won't have an immediate impact on Starbucks' strategy or financial results, but if the trends were to spread, the firm would be better positioned to absorb higher costs than its industry peers. Earlier this week, the firm upgraded the coffee chain to Buy - from a Neutral rating - despite a tough backdrop and recent investments. Check out the performance of SBUX shares over the past year.

• Go deeper: In recent months, employees have gone on strike at Deere, Mondelez and Kellogg, as workers find themselves with increased leverage due to a massive labor crunch. President Biden has also promised to be the "most pro-union president in American history," declaring that "unions built the middle class," while there have also been union votes in at Amazon, the second-largest private employer in America.