Starbucks 2009 Annual Report Download - page 3

Dear Shareholders,
In my letter to you two years ago, I expressed concern over challenges confronting our business of a breadth and
magnitude unlike anything I had ever seen before. For the fi rst time, we were beginning to see traffi c in our U.S. stores
slow. Strong competitors were entering our business. And perhaps most troublesome, where in the past Starbucks had
always been forward-thinking and nimble in its decision-making and execution, like many fast-growing companies before
us, we had allowed our success to make us complacent.
As I returned to the role of president and chief executive offi cer, it was obvious to me, and to our leadership team, that
Starbucks needed nothing less than a full-fl edged transformation to return to profi table growth. Since then, we have
worked through the multitude of challenges required to revitalize our brand and transform our company—all in the face
ofthe worst global economic environment of our generation.
Today, I am pleased to report that we have made and continue to make signifi cant progress in transforming Starbucks
andreturning the company to sustainable, profi table growth while preserving our values and guiding principles.
Our Transformation Journey
Our blueprint for change was the transformation agenda: improving the state of
our business through better training, tools and products; renewing our attention
to store-level economics and operating effi ciency; reigniting our emotional
attachment with customers; and realigning Starbucks organization for the long
term. In fi scal 2009, the seeds of our transformation began to take root.
Disciplined Operations
We applied rigor and discipline to all areas of the business and put sharp focus
on unit economics. We focused on operational excellence—from supply chain
to back-end IT systems to store operations. We also developed a better go-to-
market engine, with stronger creative execution and more effective channels
to reach our customers. Together, these efforts are enabling us to makebetter-
informed decisions—and to bring products and initiatives to market faster and
more cost effectively. At the same time, we took steps to permanently improve
our cost structure, which resulted in removing $580 million in costs fromthe
business in fi scal 2009 alone.
But it was clear to us that cost reductions and improved operating effi ciencies
alone were not enough. True transformation would require us to improve our
customer experience, and to once again aggressively differentiate and innovate.
Innovating for a Better Customer Experience
In conjunction with our focus on operations, we made signifi cant investments to improve the customer experience in our
stores. Our store partners have made measurable improvements in service, beverage quality and store condition. As a
result, over the past fi scal year, our already high customer satisfaction scores have increased a full 10 percentage points.
For this, I applaud our store partners all over the world, who defi ne the Starbucks Experience one cup at a time, every day.
As consumer trends evolved in the face of the weakening global economy, we responded quickly with relevant innovation
in our loyalty card program and with compelling value offerings and innovative food pairings. We elevated and reaffi rmed
our leadership in coffee quality, evolving our sustainable sourcing, roasting and blending approaches. We also renewed
our commitment to espresso excellence, ensuring that we are providing the highest-quality handcrafted, customized
beverages to suit every customer’s taste. The results have validated our focus. Sales of Starbucks® Anniversary Blend
coffee exceeded those of any year since it launched in 1996. Our partnership with (RED)™ continues to outperform
expectations, generating enough money during its fi rst year to buy more than seven million daily doses of medicine to help
fi ght AIDS in Africa. Our decision to offer both Pike Place Roast™ and a bolder roast profi le with fresher brew times has
been extremely well received by our core customers. And our seasonal beverages such as Pumpkin Spice Latte and
Caramel Brulée Latte were customer favorites this holiday season.
As consumers have increasingly requested healthier food choices, we responded by offering new products with whole
grains and other wholesome ingredients. We also thoroughly revamped our food offerings: simplifying recipes and taking
out artifi cial trans fat, high-fructose corn syrup and artifi cial fl avors and dyes. Customers will continue to see improved
choices and an expanded menu of healthier food choices in the months and year ahead.
We applied technology to revolutionize the way we communicate with consumers through social and digital media.
Starbucks has been named the most engaged consumer brand, using communities such as Facebook, Twitter and
MyStarbucks Idea to connect with our customers outside the store environment. We are in constant dialogue with our