Starbucks 2014 Annual Report Download - page 15

Starbucks Corporation 2014 Form 10-K 11
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• The unauthorized access, theft or destruction of customer or employee personal, financial or other data or of Starbucks
proprietary or confidential information that is stored in our information systems could impact our reputation and brand
and expose us to potential liability and loss of revenues.
Our information technology systems, such as those we use for our point-of-sale, web and mobile platforms, including online
and mobile payment systems and rewards programs, and for administrative functions, as well as the information technology
systems of our third party business partners and service providers, can contain personal, financial or other information that is
entrusted to us by our customers and employees. Our information technology systems also contain Starbucks proprietary and
other confidential information related to our business. Security breaches of our or a third party’s information technology
systems that result in the unauthorized access, theft or destruction of customers' or employees' data or that of the Company
stored in such systems, including through cyber-attacks or other external or internal methods, could result in a material loss of
revenues from the potential adverse impact to our reputation and brand, our ability to retain or attract new customers and the
potential disruption to our business and plans. Such security breaches also could result in a violation of applicable US and
international privacy and other laws, and subject us to private consumer or securities litigation and governmental investigations
and proceedings, any of which could result in our exposure to material civil or criminal liability. Our reputation and brand and
our ability to attract new customers could also be adversely impacted if we fail, or are perceived to have failed, to properly
respond to these incidents, which could also result in similar exposure to liability. Significant capital investments and other
expenditures could be required to remedy the problem and prevent future breaches, including costs associated with additional
security technologies, personnel, experts and credit monitoring services for those whose data has been breached. These costs,
which could be material, could adversely impact our results of operations in the period in which they are incurred and may not
meaningfully limit the success of future attempts to breach our information technology systems. Media or other reports of
existing or perceived security vulnerabilities in our systems or those of our third party business partners or service providers,
even if no breach has been attempted or has occurred, can also adversely impact our brand and reputation and materially impact
our business. Like many other retail companies and because of the prominence of our brand, we have experienced frequent
attempts to compromise our information technology systems but none have resulted in a material breach. Additionally, the
techniques and sophistication used to conduct cyber-attacks and breaches of information technology systems, as well as the
sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have
been in place for a period of time. We continue to make significant investments in technology, third party services and
personnel to develop and implement systems and processes that are designed to anticipate cyber-attacks and prevent breaches
of our information technology systems or data loss, but these security measures cannot provide assurance that we will be
successful in preventing such breaches or data loss.
• Incidents involving food-borne illnesses, food tampering, food contamination or mislabeling, whether or not accurate, as
well as adverse public or medical opinions about the health effects of consuming our products, could harm our business.
Instances or reports, whether true or not, of unclean water supply or food-safety issues, such as food-borne illnesses, food
tampering, food contamination or mislabeling, either during growing, manufacturing, packaging, storing or preparation, have in
the past severely injured the reputations of companies in the food processing, grocery and quick-service restaurant sectors and
could affect us as well. Any report linking us to the use of unclean water, food-borne illnesses or food tampering,
contamination, mislabeling or other food-safety issues could damage our brand value and severely hurt sales of our beverages
and food products, and possibly lead to product liability claims, litigation (including class actions) or damages. Clean water is
critical to the preparation of coffee and tea beverages and our ability to ensure a clean water supply to our stores can be limited,
particularly in some international locations. We have also incorporated many products in our food and beverage lineup that
require freezing or refrigeration, including produce (such as fruits and vegetables in our salads and juices), dairy products (such
as milk and cheeses) and meats. If customers become ill from food-borne illnesses, tampering, contamination, mislabeling or
other food-safety issues, we could also be forced to temporarily close some stores and/or supply chain facilities, as well as
recall products. In addition, instances of food-safety issues, even those involving solely the restaurants or stores of competitors
or of suppliers or distributors (regardless of whether we use or have used those suppliers or distributors), could, by resulting in
negative publicity about us or the foodservice industry in general, adversely affect our sales on a regional or global basis. A
decrease in customer traffic as a result of food-safety concerns or negative publicity, or as a result of a temporary closure of any
of our stores or recalls, as well as adverse results of claims or litigation, could materially harm our business and results of
operations.
Some of our products contain caffeine, dairy products, sugar and other compounds, the health effects of which are the subject
of public scrutiny, including the suggestion that excessive consumption of caffeine, dairy products, sugar and other compounds
can lead to a variety of adverse health effects. Particularly in the US, there is increasing consumer awareness of health risks,
including obesity, due in part to increased publicity and attention from health organizations, as well as increased consumer
litigation based on alleged adverse health impacts of consumption of various food products. While we have a variety of
beverage and food items, including items that are coffee-free and have reduced calories, an unfavorable report on the health