Starbucks 2006 Annual Report Download - page 10

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Licensing — Branded products
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 the fiscal second quarter of 2005, and launched a coffee and cream liqueur product in the second
quarter of fiscal 2006 in restaurants, bars and retail outlets where premium distilled spirits are sold. During the fiscal
fourth quarter of 2006, the Company launched Starbucks
TM
Coffee Liqueur and Cream Liqueur in Canada. The
Company does not and will not sell the liqueur products in its Company-operated or licensed retail stores.
In September 2005, the Company launched Starbucks Discoveries
TM
, 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 fiscal 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.
Collectively, the revenues from these branded products accounted for 2% of specialty revenues in fiscal 2006.
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. The majority
of the Company’s direct distribution accounts are with SYSCO Corporation’s and U.S. Foodservice’s
TM
national
broadline distribution networks and Starbucks foodservice sales, customer service and support resources are aligned
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 16,200 accounts at fiscal year end 2006, and revenues from these accounts comprised
27% 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 the
innovative 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. In the first quarter of fiscal 2007, Starbucks and Apple»announced the
availability of the Starbucks Hear Music catalog on the iTunes»Store, giving iTunes users the ability to preview, buy and
download a wide variety of popular Starbucks Hear Music»titles.
The Company has a strategic agreement with Chase Bank USA, N.A. and Visa to issue the Starbucks Card Duetto
TM
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
6STARBUCKS CORPORATION, FORM 10-K