Starbucks 2003 Annual Report Download - page 2

14฀ Fiscal฀2003฀Annual฀Report
Fiscal฀2003฀Annual฀Report฀ 15
Asia-Pacific฀ Europe/MiddleEast/Africa ฀฀฀฀฀฀฀฀฀฀฀฀฀฀ Americas
Japan ฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 486฀ Saudi฀Arabia฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 29฀฀฀฀฀฀Canada ฀฀฀฀฀฀฀฀฀฀฀฀53
China฀฀฀฀฀฀฀฀฀฀฀฀฀ 116฀ United฀Arab฀Emirates ฀฀฀ 27฀฀฀฀฀฀Hawaii฀ ฀฀฀฀฀฀฀฀฀฀฀38
Taiwan ฀฀฀฀฀฀฀฀฀฀฀ 113฀ Germany ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 25฀฀฀฀฀฀Mexico ฀฀฀฀฀฀฀฀฀฀฀17
South฀Korea฀฀฀฀฀฀ 75฀ Kuwait ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 20฀฀฀฀฀฀Puerto฀Rico ฀฀฀฀฀ 3
Philippines฀฀฀฀฀฀฀฀ 54฀ Spain฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 15฀฀฀฀฀฀Peru ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 1
Malaysia ฀฀฀฀฀฀฀฀฀฀฀ 37฀ Switzerland฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 15฀฀฀฀฀฀Chile฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 1
New฀Zealand ฀฀฀฀ 35฀ Greece ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 12฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
Singapore ฀฀฀฀฀฀฀฀฀ 35฀ Lebanon ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀9฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
Indonesia฀฀฀฀฀฀฀฀฀฀ 17฀ Austria฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀8฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ Qatar ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀5฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ Bahrain ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀4฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ Turkey ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀4฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ Oman ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀3฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀
Total ฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 968฀ ฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 176฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀฀ 113
Product฀ sales฀ to฀ and฀ royalty฀ and฀ license฀ fee฀ revenues฀ from฀
international฀licensed฀retail฀stores฀accounted฀for฀approximately฀
17%฀of฀specialty฀revenues฀in฀fiscal฀2003.฀In฀total,฀worldwide฀
retail฀ store฀ licensing฀ accounted฀ for฀ approximately฀ 39%฀ of฀
specialty฀revenues฀in฀fiscal฀2003.
Starbucks฀ has฀ a฀ licensing฀ agreement฀ with฀ Kraft฀ Foods,฀ Inc.฀
(“Kraft”)฀ to฀ market฀ and฀ distribute฀ Starbucks฀ whole฀ bean฀
and฀ground฀coffees฀to฀grocery฀stores฀as฀well฀as฀in฀warehouse฀
club฀ stores.฀ Pursuant฀ to฀ that฀ agreement,฀ Kraft฀ manages฀ all฀
distribution,฀ marketing,฀ advertising฀ and฀ promotions฀ for฀
Starbucks฀whole฀bean฀and฀ground฀coffee฀in฀grocery฀and฀mass฀
merchandise฀stores฀and฀pays฀a฀royalty฀to฀Starbucks฀based฀on฀
a฀percentage฀of฀total฀net฀sales.฀Additionally,฀Kraft฀distributes฀
Starbucks฀ products฀ to฀ warehouse฀ club฀ stores,฀ for฀ which฀ the฀
Company฀pays฀a฀distribution฀fee.฀By฀the฀end฀of฀fiscal฀2003,฀
the฀Company’s฀whole฀bean฀and฀ground฀coffees฀were฀available฀
throughout฀the฀United฀States฀in฀approximately฀19,500฀grocery฀
and฀ warehouse฀ club฀ accounts.฀ Revenues฀ from฀ grocery฀ and฀
warehouse฀ club฀ accounts฀ comprised฀ approximately฀ 25%฀ of฀
specialty฀revenues฀in฀fiscal฀2003.
The฀ Company฀ has฀ licensed฀ the฀ rights฀ to฀ produce฀ and฀
distribute฀Starbucks฀branded฀products฀to฀two฀partnerships฀in฀
which฀the฀Company฀holds฀a฀50%฀equity฀interest:฀The฀North฀
American฀Coffee฀Partnership฀with฀the฀Pepsi-Cola฀Company฀
develops฀and฀distributes฀bottled฀Frappuccino®฀and฀Starbucks฀
DoubleShot™฀ coffee฀ drinks;฀ and฀ the฀ Starbucks฀ Ice฀ Cream฀
Partnership฀ with฀ Dreyer’s฀ Grand฀ Ice฀ Cream,฀ Inc.฀ develops฀
and฀distributes฀premium฀ice฀creams.฀The฀associated฀revenues฀
from฀these฀equity฀investees฀accounted฀for฀approximately฀1%฀
of฀specialty฀revenues฀in฀fiscal฀2003.฀
Foodservice฀Accounts
The฀Company฀sells฀whole฀bean฀and฀ground฀coffees,฀including฀
the฀Starbucks,
®฀Seattle’s฀Best฀Coffee®฀and฀Torrefazione฀Italia®฀
brands,฀ to฀ institutional฀ foodservice฀ companies฀ that฀ service฀
business,฀ industry,฀ education฀ and฀ healthcare฀ accounts,฀
office฀ coffee฀ distributors,฀ hotels,฀ restaurants,฀ airlines฀ and฀
other฀ retailers.฀ In฀ fiscal฀ 2003,฀ Starbucks฀ became฀ the฀ only฀
premium฀ national฀ brand฀ coffee฀ actively฀ promoted฀ by฀
SYSCO฀ Corporation’s฀ national฀ broadline฀ distribution฀
network.฀ The฀ Company฀ is฀ currently฀ in฀ the฀ process฀ of฀
transitioning฀the฀majority฀of฀its฀ foodservice฀accounts฀to฀ the฀
broadline฀distribution฀network฀as฀well฀as฀aligning฀its฀current฀
foodservice฀sales,฀service฀and฀support฀resources฀with฀SYSCO฀
Corporation.฀ This฀ alliance฀ is฀ expected฀ to฀ improve฀ service฀
levels฀ to฀ current฀ customers฀ and฀ generate฀ new฀ foodservice฀
accounts฀ over฀ the฀ next฀ several฀ years.฀ In฀ fiscal฀ 2003,฀ the฀
Company฀ had฀ approximately฀ 12,800฀ foodservice฀ accounts,฀
and฀ revenues฀ from฀ these฀ accounts฀ comprised฀ approximately฀
27%฀of฀specialty฀revenues.
Other฀Initiatives
The฀ Company฀ has฀ several฀ other฀ initiatives฀ designed฀ to฀
enhance฀ its฀ core฀ business.฀ For฀ example,฀ the฀ Company฀ has฀
marketed฀ a฀ selection฀ of฀ premium฀ tea฀ products฀ since฀ the฀
acquisition฀of฀Tazo,฀L.L.C.฀in฀1999.฀The฀Company฀maintains฀
a฀ website฀ at฀ Starbucks.com฀ through฀ which฀ customers฀ may฀
purchase,฀ register฀ or฀ reload฀ a฀ Starbucks฀ stored฀ value฀ card,฀
as฀well฀as฀ apply฀for฀the฀Starbucks฀ Card฀ Duetto™฀ Visa®฀ (the฀
“Duetto฀ Card”),฀ issued฀ through฀ the฀ Company’s฀ agreement฀
with฀BankOne฀Corporation฀and฀Visa.฀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.฀
Additionally,฀ the฀ website฀ contains฀ information฀ about฀ the฀
Company’s฀ coffee฀ products,฀ brewing฀ equipment฀ and฀ store฀
locations.฀The฀Company฀also฀maintains฀an฀e-commerce฀site฀
at฀ SeattlesBest.com,฀ from฀ which฀ customers฀ may฀ purchase฀
coffee,฀coffee฀ f lavorings฀and฀ gift฀items฀ online.฀ Collectively,฀
these฀operations฀accounted฀for฀approximately฀8%฀of฀specialty฀
revenues฀in฀fiscal฀2003.฀