Starbucks 2008 Annual Report Download - page 3

Dear Shareholders,
When we brought 10,000 partners together in New Orleans last October, Starbucks was at a crossroads.
We had just completed a very diffi cult fi scal 2008, and after 16 years of continuous growth as a public
company, we were for the fi rst time talking about slowing growth, store closures and cost reductions.
Consumer confi dence was approaching all-time lows, and both Wall Street and Main Street were reeling.
In the face of these challenges, we made what many believed to be a controversial decision to invest in our
people. For me, the decision was obvious. The core of our brand and of our success for more than three
decades has been our partners. Our future growth depends on them, and on staying true to the values that
made Starbucks the world-class brand it is today.
At our Leadership Conference, we asked our partners to make a commitment to doing business in a new
way. (What you see on the cover of this report is the Commitment Wall—which 10,000 partners from all over
North America signed.) We asked them to operate their stores as if they
were their own businesses, to deliver an experience that would engage
our customers and to get involved with their communities as never
before. We also introduced them to new tools and technology we knew
they needed to meet these objectives. Most important, we reenergized
our partners and sent them back to their stores to deliver results.
Our store partners are now better equipped to operate in a different
environment, with a renewed focus on what has defi ned Starbucks
for all these years: our coffee, our customers, our stores and the
communities we serve. Starbucks, too, is ready for the realities of
today’s diffi cult business environment, with a relentless focus on
remaining true to who we are and on our responsibility to shareholders.
While the year presented us—along with most other retailers—with
signifi cant challenges, it also gave us the best evidence yet that
the Starbucks brand remains relevant and powerful, and that our
customers remain loyal and invested in our success. In spite of the economy, as I write this, Starbucks
business fundamentals are strong: we have more than 160,000 partners who handle approximately 50 million
transactions every week in our nearly 17,000 stores in 49 countries. We generate strong cash fl ow and have
solid liquidity, and we are executing rigorous cost-containment initiatives to improve our bottom line.
We have a differentiated and diversifi ed revenue mix, including consumer packaged goods (CPG) and
foodservice and licensed stores businesses, as well as the Seattle’s Best Coffee brand. Our profi table CPG
business is expanding internationally, and the ready-to-drink piece of that business is steadily gaining market
share around the world. Customers purchased nearly half a million Starbucks Gold Cards and more than
5 million Starbucks Cards at Costco during the holiday season. They have loaded a record number of dollars
on their traditional Starbucks Cards, and we expect to see the results of this throughout fi scal 2009. All of this
gives me confi dence that Starbucks—unlike many other retailers—has what it takes to endure as a vital part
of the fabric of every community and neighborhood where we do business.
In fi scal 2008, we invested in the Starbucks Experience and what we know our customers are looking
for when they visit our stores. We put a signifi cant emphasis on coffee—starting with the launch of
Pike Place™ Roast, our new everyday brewed coffee. This emphasis included the introduction of the
Starbucks Mastrena,
™ our new, lower-profi le espresso machines, and the purchase of the company that