Starbucks 2000 Annual Report Download - page 4

Business
Starbucks Corporation and its subsidiaries (collectively “Starbucks” or the “Company”) purchases and
roasts high quality whole bean coffees and sells them, along with fresh, rich-brewed coffee, Italian-
style espresso beverages, cold blended beverages, a variety of pastries and confections, coffee-related
accessories and equipment, and a line of premium teas, primarily through its Company-operated
retail stores. In addition to sales through its Company-operated retail stores, Starbucks sells coffee
and tea products through other channels of distribution (collectively, “specialty operations”).
Starbucks, through its joint venture partnerships, also produces and sells bottled Frappuccino®
coffee drink and a line of premium ice creams. The Company’s objective is to establish Starbucks as
the most recognized and respected brand in the world. To achieve this goal, the Company plans to
continue to rapidly expand its retail operations, grow its specialty operations and selectively pursue
other opportunities to leverage the Starbucks brand through the introduction of new products and the
development of new distribution channels.
The Company’s retail goal is to become the leading retailer and brand of coffee in each of its target
markets by selling the finest quality coffee and related products and by providing superior customer
service, thereby building a high degree of customer loyalty. Starbucks strategy for expanding its retail
business is to increase its market share in existing markets and to open stores in new markets where
the opportunity exists to become the leading specialty coffee retailer. In furtherance of this strategy,
the Company opened 490 new stores during the fiscal year ended October 1, 2000 (“fiscal 2000”).
At fiscal year end, Starbucks had 2,619 Company-operated stores in 34 states, the District of
Columbia and five Canadian provinces (which comprise the Company-operated North American retail
operations), as well as the United Kingdom, Thailand and Australia (which comprise the Company-
operated international retail operations). Company-operated retail stores accounted for approximately
84% of net revenues during fiscal 2000. The Company intends to finance additional growth in the
number of Company-operated retail stores with cash flow from operations.
Starbucks specialty operations strive to develop the Starbucks brand outside the Company-operated
retail store environment through a number of channels. Starbucks strategy for expanding its specialty
operations is to reach customers where they work, travel, shop and dine by establishing relationships
with prominent third parties who share Starbucks values and commitment to quality. These relationships
take various forms, including retail store licensing agreements, wholesale accounts, grocery channel
licensing agreements and joint ventures. Starbucks specialty operations also include direct-to-
consumer marketing channels. In certain licensing situations, the licensee is a joint venture in which
Starbucks has an equity ownership interest. During fiscal 2000, specialty revenues (which include
royalties and fees from licensees as well as product sales) accounted for approximately 16% of the
Company’s net revenues.
P. 20 starbucks coffee company