Starbucks 2005 Annual Report Download - page 7

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Taiwan Ltd. In fiscal 2006, the Company plans to enter 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.
Collectively, the revenues from these branded products accounted for 2% of specialty revenues in fiscal 2005.
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, restau-
rants, airlines and other retailers. Beginning in fiscal 2003, the Company transitioned the majority of its direct
distribution accounts to SYSCO Corporation's and U.S. Foodservice's
TM
national broadline distribution
network and aligned foodservice sales, customer service and support resources with those of SYSCO
Corporation and U.S. Foodservice. Starbucks and Seattle's Best Coffee are the only superpremium national-
brand coffees actively promoted by SYSCO Corporation. The Company's total worldwide foodservice
operations had approximately 15,500 accounts at fiscal year end 2005, and revenues from these accounts
comprised 29% of total specialty revenues.
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
TM
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 Starbucks Hear Music's innovative partnerships
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 also maintains a website at Starbucks.com where customers may purchase, register or reload
Starbucks stored value cards, as well as apply for the Starbucks Card Duetto
TM
Visa» (the ""Duetto Card''),
issued through the Company's agreement with Chase Bank USA, N.A. 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. Collectively, the operations of these other initiatives accounted for 3% of
specialty revenues in fiscal 2005.
Product Supply
Starbucks is committed to selling only the finest whole bean coffees and coffee beverages. To ensure
compliance with its rigorous coffee standards, Starbucks controls its coffee purchasing, roasting and
packaging, and the distribution of coffee to its retail stores. The Company purchases green coffee beans from
coffee-producing regions around the world and custom roasts them to its exacting standards for its many
blends and single origin coffees.
The supply and price of coffee are subject to significant volatility. Although most coffee trades in the
commodity market, coffee of the quality sought by the Company tends to trade on a negotiated basis at a
substantial premium above commodity coffee prices, depending upon the supply and demand at the time of
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