Starbucks 2011 Annual Report Download - page 13

ready-to-drink beverages, are purchased from several specialty suppliers, usually under long-term supply contracts.
Food products, such as fresh pastries, breakfast sandwiches and lunch items, are purchased from national, regional
and local sources. We also purchase a broad range of paper and plastic products, such as cups and cutlery, from
several companies to support the needs of our retail stores as well as our manufacturing and distribution operations.
We believe, based on relationships established with these suppliers and manufacturers, that the risk of non-delivery
is remote.
Competition
Our primary competitors for coffee beverage sales are quick-service restaurants and specialty coffee shops. In
almost all markets in which we do business, there are numerous competitors in the specialty coffee beverage
business. We believe that our customers choose among specialty coffee retailers primarily on the basis of product
quality, service and convenience, as well as price. We continue to experience direct competition from large
competitors in the US quick-service restaurant sector and continue to face competition from well-established
companies in many international markets and in the US ready-to-drink coffee beverage market.
Our whole bean coffees, ground packaged coffees, Tazo®teas, and Starbucks VIA®Ready Brew compete directly
against specialty coffees and teas sold through supermarkets, club stores and specialty retailers. Our whole bean
coffees, coffee beverages, and Starbucks VIA®Ready Brew compete indirectly against all other coffees on the
market. Starbucks also faces competition from both restaurants and other specialty retailers for prime retail locations
and qualified personnel to operate both new and existing stores.
Patents, Trademarks, Copyrights and Domain Names
Starbucks owns and has applied to register numerous trademarks and service marks in the US and in many
additional countries throughout the world. Some of our trademarks, including Starbucks, the Starbucks logo,
Seattle’s Best Coffee, Frappuccino, Starbucks VIA and Tazo are of material importance. The duration of trademark
registrations varies from country to country. However, trademarks are generally valid and may be renewed
indefinitely as long as they are in use and/or their registrations are properly maintained.
We own numerous copyrights for items such as product packaging, promotional materials, in-store graphics and
training materials. We also hold patents on certain products, systems and designs. In addition, Starbucks has
registered and maintains numerous Internet domain names, including “Starbucks.com”, “Starbucks.net”, and
“Seattlesbest.com.”
Research and Development
Our research and development teams are responsible for the technical development of food and beverage products
and new equipment. We spent approximately $15 million, $9 million and $7 million during fiscal 2011, 2010 and
2009, respectively, on technical research and development activities, in addition to customary product testing and
product and process improvements in all areas of our business.
Seasonality and Quarterly Results
Our business is subject to seasonal fluctuations, including fluctuations resulting from the holiday season. Cash flows
from operations are considerably higher in the first fiscal quarter than the remainder of the year. This is largely
driven by cash received as Starbucks Cards are purchased and loaded during the holiday season. Since revenues
from the Starbucks Cards are recognized upon redemption and not when purchased, seasonal fluctuations on the
consolidated statements of earnings are much less pronounced. Quarterly results can also be affected by the timing
of the opening of new stores and the closing of existing stores. For these reasons, results for any quarter are not
necessarily indicative of the results that may be achieved for the full fiscal year.
7