Starbucks 2011 Annual Report Download - page 29

traditional store experience to offer consumers new coffee and other products in multiple forms, across new
categories, and through diverse channels, leveraging our strong brand and established retail store base. Examples
include the ongoing global expansion of our successful Starbucks VIA®Ready Brew product and Starbucks- and
Tazo-branded K-Cup®portion packs which were added to the lineup at the start of fiscal 2012. CPG contributed 7%
of total net revenues in fiscal 2011.
Looking toward the future, we recently announced a reorganization of our leadership structure that took effect at the
beginning of fiscal 2012. The new structure will enable us to accelerate our global, multi-brand, multi-channel
strategy, and to leverage the talent, experience and expertise resident in our senior leadership team. In this new
structure, one president will oversee all operations within each of three distinct regions with responsibility for the
performance of company-operated stores, as well as for working with licensed and joint-venture business partners in
each market within their respective region. The region president will also be responsible for working with Starbucks
Global Consumer Products and Foodservice teams to further develop those businesses and execute against our
growth plan within the region. The three new regions will be 1) Americas, inclusive of the US, Canada, and Latin
America, 2) China and Asia Pacific, and 3) Europe, Middle East, and Africa, collectively referred to as the EMEA
region.
Fiscal 2012 — The View Ahead
For fiscal year 2012, we expect moderate revenue growth driven by mid single-digit increased comparable store
sales, new store openings and strong growth in the CPG business. Licensed stores will comprise between one-half
and two-thirds of new store openings in the Americas, EMEA and China and Asia Pacific regions.
We expect modest consolidated operating margin and EPS improvement compared to fiscal 2011, given our current
revenue expectations, along with ongoing spend related to our expanding CPG in-house direct distribution model
and higher commodity costs.
We expect increased capital expenditures in fiscal 2012 compared to fiscal 2011, reflecting additional investments in
store renovations and in manufacturing capacity.
Operating Segment Overview
Through the end of fiscal 2011, Starbucks had three reportable operating segments: US, International, and CPG. Our
Seattle’s Best Coffee operating segment is reported in “Other,” along with our Digital Ventures business and
unallocated corporate expenses that pertain to corporate administrative functions that support our operating
segments but are not specifically attributable to or managed by any segment and are not included in the reported
financial results of the operating segments.
The US and International segments both include company-operated stores and licensed retail stores. Licensed stores
generally have a higher operating margin than company-operated stores. Under the licensed model, Starbucks
receives a reduced share of the total store revenues, but this is more than offset by the reduction in its share of costs
as these are primarily borne by the licensee. The International segment has a higher relative share of licensed stores
versus company-operated stores compared to the US segment; however, the US segment has been operating
significantly longer than the International segment and has developed deeper awareness of, and attachment to, the
Starbucks brand and stores among its customer base. As a result, the more mature US segment has significantly
more stores, and higher total revenues than the International segment. Average sales per store are also higher in the
US due to various factors including length of time in market and local income levels. Further, certain market costs,
particularly occupancy costs, are lower in the US segment compared to the average for the International segment,
which comprise a more diverse group of operations. As a result of the relative strength of the brand in the US
segment, the number of stores, the higher unit volumes, and the lower market costs, the US segment, despite its
higher relative percentage of company-operated stores, has a higher operating margin than the less-developed
International segment.
Starbucks International store base continues to expand and we continue to focus on achieving sustainable growth
from established international markets while at the same time investing in emerging markets, such as China. Newer
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