Starbucks Corporation engages in the purchase, roasting, and sale of whole bean coffees. The company also sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, various complementary food items, coffee-related accessories and equipment, a selection of premium teas and a line of compact discs, primarily through its retail stores. Starbucks also sells coffee and tea products and licenses its trademark through other channels and, through certain of its equity investees, Starbucks produces and sells ready-to-drink beverages which include, among others, bottled Frappuccino coffee drinks and Starbucks DoubleShot espresso drinks, and a line of superpremium ice creams.
Segments
The company conducts its operations through three segments: Global Consumer Products Group (CPG), the United States segment, and International segment.
The United States and International segments both include Company-operated retail stores and certain components of Specialty Operations. Specialty operations within the United States include licensed retail stores, foodservice accounts and other initiatives related to the Company’s core business. International specialty operations primarily include retail store licensing operations in approximately 25 countries and foodservice accounts in Canada and the United Kingdom. The CPG segment includes the Company’s grocery and warehouse club business as well as branded products operations worldwide.
Company-operated Retail Stores
Starbucks Company-operated retail stores include 11 Seattle’s Best Coffee (SBC) stores and 4 Hear Music retail stores. All Starbucks stores offer a choice of regular and decaffeinated coffee beverages, a selection of Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages, a selection of teas and distinctively packaged roasted whole bean coffees. Starbucks stores also offer a selection of fresh pastries and other food items, sodas, juices, bottled water, coffee-making equipment and accessories, a selection of compact discs, games and seasonal novelty items.
Larger stores carry a selection of the Company’s whole bean coffees in various sizes and types of packaging, as well as an assortment of coffee and espresso-making equipment and accessories such as coffee grinders, coffee filters, storage containers, travel tumblers and mugs. In the United States and in International markets, approximately 3,800 stores and 1,300 stores, respectively, carry a selection of prepared sandwiches and salads.
Specialty Operations
Specialty Operations develops the company’s brands outside its operating retail store environment through a number of channels. These relationships take various forms, including licensing arrangements, foodservice accounts and other initiatives related to the company’s core businesses.
Licensing: During 2006, 733 new Starbucks licensed retail stores were opened in the United States and, as of October 1, 2006, the Company’s licensees operated 3,168 stores. In addition, 426 new International licensed stores were opened. The Company’s International operating segment had a total of 2,170 licensed retail stores.
In grocery and warehouse club stores throughout the United States, the Company sells a selection of Starbucks whole bean and ground coffees, as well as Seattle’s Best Coffee and Torrefazione Italia branded coffees and a selection of premium Tazo teas through a licensing relationship with Kraft Foods, Inc. (Kraft). Kraft manages all distribution, marketing, advertising and promotion of these products. In International markets, Starbucks also has licensing arrangements with other grocery and warehouse club stores.
The Company has licensed the rights to produce and distribute Starbucks branded products to two partnerships in which the Company holds 50% equity interests. The North American Coffee Partnership with the Pepsi-Cola Company develops and distributes ready-to-drink beverages which include, among others, bottled Frappuccino coffee drinks and Starbucks DoubleShot espresso drinks. The Starbucks Ice Cream Partnership with Dreyer’s Grand Ice Cream, Inc., develops and distributes superpremium ice creams.
Starbucks and Jim Beam Brands Co., a unit of Fortune Brands, Inc., manufacture and market Starbucks-branded premium coffee liqueur products in the United States and Canada. The Company introduced a coffee liqueur product nationally during 2005, and launched a coffee and cream liqueur product in 2006 in restaurants, bars and retail outlets where premium distilled spirits are sold. During 2006, the Company launched Starbucks Coffee Liqueur and Cream Liqueur in Canada.
In September 2005, the Company launched Starbucks Discoveries, a ready-to-drink chilled cup coffee beverage in refrigerated cases of convenience stores in Japan, through a manufacturing and distribution agreement with Suntory Limited, and in Taiwan, through separate co-packing and distribution agreements with Uni-President Enterprises Corporation and the Company’s equity investee, President Starbucks Coffee Taiwan Ltd. In 2006, the Company entered the ready-to-drink coffee category in South Korea through a licensing agreement with Dong Suh Foods Corporation to import bottled Starbucks Frappuccino coffee drinks produced in the United States.
Foodservice
The Company sells whole bean and ground coffees, including the Starbucks, Seattle’s Best Coffee and Torrefazione Italia brands, as well as a selection of premium Tazo teas, to institutional foodservice companies that service business, industry, education and healthcare accounts, office coffee distributors, hotels, restaurants, airlines and other retailers.
Other Initiatives
Included in this category is the Company’s emerging entertainment business, which encompasses multiple music and technology based initiatives designed to appeal to new and existing Starbucks customers. Among these initiatives are strategic marketing and co-branding arrangements, such as the 24-hour Starbucks Hear Music digital music channel 75 available to all XM Satellite Radio subscribers, and the availability of wireless broadband Internet service in Company-operated retail stores located in the United States and Canada. Additionally, the entertainment business includes the partnerships of Starbucks Hear Music with other music labels for the production, marketing and distribution of both exclusive and nonexclusive music, music programming for Starbucks stores worldwide, and CD sales through the Company’s website at Starbucks.com/hearmusic.
The Company has a strategic agreement with Chase Bank USA, N.A. and Visa to issue the Starbucks Card Duetto Visa (the Duetto Card) in the United States, and a similar arrangement with Royal Bank of Canada and Visa Canada Association to issue the Duetto Card in Canada. The Duetto Card is a first-of-its-kind card, combining the functionality of a credit card with the convenience of a reloadable Starbucks Card.
Significant Events
The company and Concord Music Group have formed a record label, Hear Music, which would forge relationships directly with artists and distribute recordings at Starbucks locations as well as through traditional music channels.
The company has entered into a joint venture with New Horizons and would open its first store in New Delhi in 2007.
In December 2006, the company opened a coffeehouse in Egypt through local partner Alshaya Egypt. It is located in Cairo's City Centre. Alshaya operates approximately 200 Starbucks stores across the Middle East and Turkey.
History
Starbucks Corporation was founded by Howard Schultz in 1985.
