Starbucks 2009 Annual Report Download - page 13

Licensing — Packaged coffee and tea
Through a licensing relationship with Kraft Foods, Inc. (“Kraft”), the Company sells a selection of Starbucks and
Seattle’s Best Coffee branded packaged coffees and Tazo»teas in grocery and warehouse club stores throughout the
US. Kraft manages all distribution, marketing, advertising and promotion of these products.
The Company sells packaged coffee and tea internationally both directly to warehouse club stores, such as Costco
Wholesale Corporation, and to grocery stores through a licensing relationship with Kraft in Canada, the UK and
other European countries.
The Company’s coffees and teas are available in approximately 39,000 grocery and warehouse club stores, with
33,500 in the US and 5,500 in International markets. Revenues from this category comprised 23% of specialty
revenues in fiscal 2009.
Licensing — Branded products
The Company licenses the rights to produce and market Starbucks branded products through several partnerships
both domestically and internationally. Significant licensing agreements include:
• The North American Coffee Partnership, a joint venture with the Pepsi-Cola Company in which Starbucks is
a 50% equity investor, manufactures and markets ready-to-drink beverages, including bottled Frappuccino»
beverages and Starbucks DoubleShot»espresso drinks in US and Canada;
• licensing agreements for the manufacturing, marketing and distribution of Starbucks Discoveries»,a
ready-to-drink chilled cup coffee beverage, and Starbucks DoubleShot»espresso drinks in Japan and
South Korea;
• a licensing agreement with a partnership formed by Unilever and Pepsi-Cola Company for the manufac-
turing, marketing and distribution of Starbucks super-premium Tazo»Tea ready-to-drink beverages in the
US; and
• a licensing agreement with Unilever for the manufacturing, marketing and distribution of Starbucks super-
premium ice cream products in the US.
Collectively, the revenues from these branded products accounted for 4% of specialty revenues in fiscal 2009.
Foodservice
The Company sells whole bean and ground coffees, including the Starbucks and Seattle’s Best Coffee brands, as
well as a selection of premium Tazo»teas, VIA and other related products, to institutional foodservice companies
that service business and industry, education, healthcare, office coffee distributors, hotels, restaurants, airlines and
other retailers. The majority of the Company’s sales in this channel come through national broadline distribution
networks with SYSCO Corporation, US Foodservice
TM
, and other distributors. The Company’s total foodservice
operations had over 21,000 accounts, primarily in the US, at fiscal year end 2009. Revenues from foodservice
accounts comprised 23% of total specialty revenues in fiscal 2009.
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 global
distribution of coffee used in its operations. 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, high-altitude arabica 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
purchase. Supply and price can be affected by multiple factors in the producing countries, including weather,
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