Starbucks 2010 Annual Report Download - page 13

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In addition to coffee, we also purchase significant amounts of dairy products, particularly fluid milk, to support the
needs of our company-operated retail stores. Starbucks highest volumes of dairy purchases are in the US, Canada
and the UK. For these markets, we purchase substantially all of our fluid milk requirements from six dairy suppliers.
We believe, based on relationships established with these suppliers, that the risk of non-delivery of sufficient fluid
milk to support these retail businesses is remote.
Products other than whole bean coffees and coffee beverages sold in Starbucks retail stores are obtained through a
number of different channels. Beverage ingredients other than coffee and milk, including leaf teas as well as our
selection of ready-to-drink beverages, are purchased from several specialty suppliers, usually under long-term
supply contracts. Food products, such as fresh pastries, breakfast sandwiches and lunch items, are purchased from
national, regional and local sources. We also purchase a broad range of paper and plastic products, such as cups and
cutlery, from several companies to support the needs of our retail stores as well as our manufacturing and
distribution operations. We believe, based on relationships established with these suppliers and manufacturers, that
the risk of non-delivery is remote.
Competition
Our primary competitors for coffee beverage sales are quick-service restaurants and specialty coffee shops. In
almost all markets in which we do business, there are numerous competitors in the specialty coffee beverage
business. We believe that our customers choose among specialty coffee retailers primarily on the basis of product
quality, service and convenience, as well as price. We continue to experience direct competition from large
competitors in the US quick-service restaurant sector and continue to face competition from well-established
companies in many international markets and in the US ready-to-drink coffee beverage market.
Our whole bean coffees, ground packaged coffees, Tazo®teas, and Starbucks VIA®Ready Brew compete directly
against specialty coffees and teas sold through supermarkets, club stores and specialty retailers. Our whole bean
coffees, coffee beverages, and Starbucks VIA®Ready Brew compete indirectly against all other coffees on the
market. Starbucks specialty operations face significant competition from established wholesale and mail order
suppliers, some of whom have greater financial and marketing resources than we do.
Starbucks also faces competition from both restaurants and other specialty retailers for prime retail locations and
qualified personnel to operate both new and existing stores.
Patents, Trademarks, Copyrights and Domain Names
Starbucks owns and has applied to register numerous trademarks and service marks in the US and in many
additional countries throughout the world. Some of our trademarks, including Starbucks®, the Starbucks®logo,
Seattle’s Best Coffee®, Frappuccino®, Starbucks VIA®Ready Brew and Tazo®are of material importance. The
duration of trademark registrations varies from country to country. However, trademarks are generally valid and
may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.
We own numerous copyrights for items such as product packaging, promotional materials, in-store graphics and
training materials. We also hold patents on certain products, systems and designs. In addition, Starbucks has
registered and maintains numerous Internet domain names, including “Starbucks.com”, “Starbucks.net”, and
“Seattlesbest.com.”
Research and Development
Our research and development teams are responsible for the technical development of food and beverage products
and new equipment. We spent approximately $9 million, $7 million and $7 million during fiscal 2010, 2009 and
2008, respectively, on technical research and development activities, in addition to customary product testing and
product and process improvements in all areas of its business.
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