Starbucks Corp - Hot drinks
World
Bilag 1
Starbucks Corp - Hot Drinks - World
Euromonitor International : Global Company Profile
March 20
List of Contents and Tables
Strategic Evaluation ................................................................................................................................................ 2
Swot analysis............................................................................................................................................................. 2
Prospects for the Hot Drinks Business ...................................................................................................................... 3
Table 1
Starbucks Corp: World Sector Sales Performance 2005 .................................................... 5
Table 2
Starbucks Corp: Hot Drinks Regional Sales Performance 2005 ........................................ 5
Corporate Overview ............................................................................................................................................... 5
Summary 1
Starbucks Corp: Key Facts ................................................................................................ 6
Performance by Region and by Sector .................................................................................................................. 7
Hot Drinks Market Assessment ................................................................................................................................. 7
Coffee ........................................................................................................................................................................ 7
Tea ............................................................................................................................................................................ 9
Table 3
Starbucks Corp: World Shares & Rankings in Hot Drinks by Sector 20042005 ..................................................................................................................................10
Table 4
Starbucks Corp: World and Regional Shares in Hot Drinks by Sector 2005 ....................10
Brand Assessment ..................................................................................................................................................11
Brand Strategy .........................................................................................................................................................11
Table 5
Starbucks Corp: Starbucks Brand Shares in Hot drinks by Sector 2004-2005..................11
Table 6
Starbucks Corp: Starbucks Regional Shares in Hot Drinks by Sector 2005 .....................12
Appendices ..............................................................................................................................................................12
Financial Summary ..................................................................................................................................................12
Table 7
Starbucks Corp: Financial Summary 2002-2005 ..............................................................12
Company Background ..............................................................................................................................................12
Summary 2
Starbucks Corp: Historical Development .........................................................................13
Summary 3
Starbucks Corp: Subsidiaries 2005 ...................................................................................17
Summary 4
Starbucks Corp: Hot Drinks Brands 2005 ........................................................................19
Summary 5
Starbucks Corp: Websites .................................................................................................19
i
Starbucks Corp
Strategic Evaluation
Swot analysis
Strengths

Powerful brand – The powerful Starbucks brand can easily be leveraged to support the company’s expansion into
new markets and new business areas. It is a major source of competitive advantage for the company. The company
has first-mover advantage having pioneered the coffeehouse concept in the 1980s. As competition intensifies, brand
recognition becomes crucial to maintaining loyalty. Through various partnerships the company has licensed rights
to produce and distribute branded ice cream, coffee-flavoured liqueurs and ready-to-drink coffees in the US.

Global presence – Starbucks is a truly global brand that resonates with consumers worldwide. The company has
over 10,000 outlets in 37 countries.

Leading player in fresh coffee beans – in the retail market, Starbucks Corp is a niche player and holds strong
position in fresh coffee beans.

Perceived as socially responsible – Starbucks Corp is committed to socially responsible coffee buying practices,
and Starbucks Fair Trade coffee is available in 23 countries. The company’s commitment to social and
environmental issues will stand it in good stead as consumers become increasingly aware of the Fair Trade
movement and the ethical treatment of coffee farmers. On the other hand, some see Starbucks as a global giant,
taking business away from small independent cafés.
Weaknesses

Reliance on US market – North America accounts for approximately 98% of Starbucks’s hot drinks retail sales.
The reason for this is twofold: approximately 70% of all Starbucks outlets are in the US and the company’s
products are widely distributed in the country through a licensing agreement with Kraft Foods.

Licensing international operations – Over two thirds of international operations are licensed stores. While
partnering up with a local player reduces risk it also diminishes margins and means Starbucks has less control over
how the brand is rolled out in a new market. Additionally, these partners may have less interest in retail sales of hot
drinks. The company is aware of this weakness and to date has increased equity ownership in 10 countries.
Opportunities

Popularity of gourmet coffees in developed coffee-drinking nations – As consumers’ tastes become increasingly
sophisticated they are turning away from instant coffee to premium fresh products as they attempt to recreate the
café experience at home. This represents a great opportunity to leverage the equity of the Starbucks brand and
increase retail sales of Starbucks coffee through foodservice outlets.

Expansion in Asia – There is great potential for further expansion in international markets specifically in AsiaPacific where over half of all Starbucks outlets outside of North America are situated. In particular, China presents
2
a unique opportunity for Starbucks as retail sales of fresh coffee are currently negligible in this country. China is
expected to be the fifth-fastest growing country globally in terms of retail value sales of coffee over the 2005-2010
period.

Coffee pods – developing a coffee pod machine would be a means of increasing value sales of fresh coffee.
Starbucks Corp already offers coffee presses and espresso machines for sale in some of its foodservice outlets, thus
the introduction of a coffee pod machine would be a natural progression. Once consumers purchase the machines
they would be tied into buying Starbucks coffee pods (as the machines are usually proprietary systems).
Threats

Competition – Starbucks Corp faces intense competition in the speciality coffee retail market. As gourmet coffee
becomes increasingly popular so leading coffee manufacturers are introducing premium brand extensions which
meet consumer demand. Specifically, Eight O’Clock Coffee Co and Tchibo Holding are poised to steal market
share from number one ranked Starbucks Corp.

Health trend – there is the possibility that as consumers become increasingly health conscious the popularity of
coffee will decline.

Volatility of coffee prices – one common denominator that has the potential to affect all fresh coffee companies is
the bean itself. As the company does not maintain coffee plantations it purchases green coffee beans from regions
throughout the world, which is then processed at its US-based roasting plant. The company sources green coffee
beans from external trading companies and is thus subject to the volatility of coffee prices.

Instant coffee – as the second fastest growing coffee product after fresh coffee beans, instant coffee presents an
opportunity for coffee manufacturers. However, it is unlikely that Starbucks Corp will pursue this path as this is not
in line with the brand image. Starbucks Corp prides itself on being a purveyor of the finest fresh coffee and
entering the instant coffee category could dilute the Starbucks brand equity. For this reason the forecast growth of
instant coffee is likely to pose a threat to Starbucks Corp rather than an opportunity.
Prospects for the Hot Drinks Business
Retail is only of secondary importance to foodservice

With low financial gearing the company is in a good position to pursue retail opportunities. However, it is likely
that entertainment will be Starbucks Corp’s core focus over the next few years as it leverages the strong Starbucks
brand in an attempt to further enhance the Starbucks experience in new and exciting ways. With entertainment
taking centre stage the company is not expected to aggressively push retail sales of hot drinks products.
Licensing agreements required to increase fresh coffee sales outside North
America

Over the review period Starbucks Corp has exceeded market growth of fresh coffee in both volume and value terms
on a global level. This is a notable achievement given that the company’s retail presence is largely limited to the
North American market. The company should be able to take advantage of the forecast growth for fresh coffee
beans (4% compound annual growth rate -CAGR - in value terms over the 2005-2010 period) if it translates its
strong brand equity internationally into retail sales.

As the company accelerates its international expansion and the Starbucks brand builds equity in regions other than
North America so retail sales through foodservice outlets should increase. However, as in North America, the retail
business is not the company’s core focus – it is a supplementary offering which complements the foodservice
business. For this reason the company is not expected to pursue licensing agreements outside of North America.
3
Brand loyalty will be tested as fresh coffee becomes more competitive

Having pioneered the trend for gourmet coffee Starbucks Corp should be well placed for growth given consumers’
rising demand for higher-quality, premium products. As the fresh coffee category becomes increasingly
competitive with other manufacturers such as Segafredo, Strauss Elite and Eight O’Clock outpacing Starbucks
Corp in terms of recent value growth, consumers’ loyalty to the Starbucks brand will be tested. It is imperative the
company continues to innovate and offers consumers a unique experience in order to remain competitive.
Instant coffee poses a threat to Starbucks Corp rather than an opportunity

As the second fastest growing coffee product after fresh coffee beans, instant coffee also presents an opportunity
for coffee manufacturers (value CAGR of 3%, 2005-2010). However, Starbucks Corp will unlikely pursue this path
as this is not in line with the brand image. Starbucks Corp prides itself on being a purveyor of the finest fresh
coffee and entering the instant coffee category could dilute the Starbucks brand equity. For this reason the forecast
growth of instant coffee is likely to pose a threat to Starbucks Corp rather than an opportunity.
Expansion into entertainment unlikely to have knock-on effects on retail sales of
coffee

The company is expected to leverage the strength of the Starbucks brand to further enhance the Starbucks
experience both in the US and internationally (particularly in the entertainment arena). Provided the company
remains focused on opportunities that reinforce its core coffee business, these extensions could have a positive
effect on hot drinks sales overall. However, it remains to be seen whether the company can translate the Starbucks
experience into retail sales.
The focus on China may not translate into retail sales

The company is currently focused on China as a market for expansion. Starbucks Corp’s chairman, Howard Shultz,
has stated that he expects China to become the company’s second-largest market in the world after North America;
however, there is no mention of time frame which leads one to question the strength of this assertion. Even if the
company does succeed in opening outlets in China this might not translate into retail sales (as the Japanese
experience shows, despite currently being the company’s second largest market outside the US, retail sales are
minimal).

Additionally, according to Euromonitor International Asia-Pacific is expected to have one of the lowest forecast
growth rates for fresh coffee, the category in which the company operates (12% over the 2005-2010 period
compared to world growth of 13% over the same period) and the company is up against some strong competitors in
hot drinks.

Africa and the Middle East and Latin America represent the greatest opportunities for fresh coffee with forecast
value growth of 29% and 28% respectively over the 2005-2010 period. Brazil could be the next country targeted by
the company. With a strong tradition of fresh coffee drinking this may be a harder market to crack (and one that the
company has yet to enter). Brazil holds great potential with the highest volume sales of fresh coffee in the world.
Although Brazil is a well developed coffee market, the only major player is Sara Lee which held a 21% retail value
share in 2005. Besides Melitta, with a 7% share, no other company held more than 3% share of the market. By
2010, the country is expected to account for over a quarter of the world’s retail sales of fresh coffee in volume
terms. However, premium-priced Starbucks coffee may be regarded as a novelty in such a developed coffeedrinking country which will result in limited retail sales.
The development of a coffee pod machine could boost retail sales of fresh coffee

Developing a coffee pod machine in conjunction with a domestic electrical appliance manufacturer could be a
means of boosting Starbucks Corp’s retail sales of fresh coffee. Such a machine would allow consumers to enjoy
4
quality coffee at home (and possibly recreate the Starbucks experience to some extent). While this could provide a
major opportunity for Starbucks Corp, it remains to be seen whether the company actively develops the retail
channel, at present it is proving difficult to translate strong brand equity in the consumer foodservice arena into
retail sales of coffee.
Table 1
Starbucks Corp: World Sector Sales Performance 2005
US$ million
Coffee
Hot drinks
Source:
Note:
Market
size
US$
million
Market
% CAGR
2000/2005
Market
% CAGR
2005/2010
% of
Company
Sales
Company
Share
2005
Global
Ranking
2005
40,357.7
70,201.9
4.8
4.7
2.7
2.5
100.0
100.0
1.4
0.8
8
11
Euromonitor International
Percentage of company sales in each sector is calculated from rsp sales within this market in 2005.
sorted by forecast CAGR 2005/2010.
Table 2
Data
Starbucks Corp: Hot Drinks Regional Sales Performance 2005
US$ million
North America
World
Source:
Note:
Market
size
US$
million
Market
% CAGR
2000/2005
Market
% CAGR
2005/2010
% of
Company
Sales
Company
Share
2005
Regional
Ranking
2005
8,834.1
70,201.9
1.4
4.7
2.0
2.5
100.0
100.0
6.3
0.8
3
11
Euromonitor International
Percentage of company sales in each region is calculated from rsp sales within this market in 2005.
by forecast CAGR 2005/2010.
Data sorted
Corporate Overview

Starbucks Corp is a US$6.4 billion business. While the Starbucks name is synonymous with gourmet coffee in
many countries, the vast majority of the company’s sales are derived from its foodservice operations. The
company sells fresh coffee for at-home consumption through its outlets worldwide (in fiscal 2005 Starbucks had a
presence in 37 countries), and through the online Starbucks Store (www.starbucksstore.com). Additionally, a
selection of Starbucks Corp’s coffees and teas are sold in grocery and warehouse club stores throughout the US via
a licensing agreement.

Starbucks Corp ranked 11th in the global market for hot drinks in 2005, with an almost 1% value share of total
retail sales. Although this may seem insignificant compared to the leading players Nestlé and Kraft Foods which
collectively account for over a quarter of global sales, Starbucks Corp is in a strong position as it is a niche player
leading fresh coffee beans where it ranked number one with a 12% share, more than double the share of the number
two player, Kraft Foods.

Starbucks Corp is highly dependent on the North American market, which accounts for approximately 98% of
retail sales of the company’s hot drinks products. The reason for this is twofold: approximately 70% of all
Starbucks outlets are in the US and the company’s products are widely distributed in the US through the licensing
5
agreement with Kraft Foods. However, only 12% of global hot drinks sales are in North America and future growth
in the region (2% CAGR, 2005-2010) is expected to be slower than world growth (3% CAGR over the same
period).
Strategic objectives and challenges
Retail sales of hot drinks are not key to the company’s business

Starbucks positions itself as more than a coffee brand. With the focus on enhancing the “experience”, offering
Starbucks products for at-home consumption is not an essential element of the company’s strategy. Rather, it is a
supportive strategy which further reinforces the brand and completes the offering. For this reason the company is
expected to expand distribution beyond Starbucks outlets worldwide.

The company is in an anomaly in the retail market for hot drinks. It is difficult to translate the “Starbucks
experience” into retail sales. Truly committed customers (those who buy into the “experience”) are the most likely
to pick up a packet of coffee while in a Starbucks outlet while enjoying the experience. However, in grocery stores
the level of consumer involvement in the purchase is lessened, and coffee quality and value for money become far
more important considerations. Starbucks coffee shares shelf space with other premium coffee brands that may be
of the same quality and possibly better priced. In this way, brand equity does not really translate into grocery sales.
Improving its position in the retail market for hot drinks would require significant investment

In 2005, sales of Starbucks products (including coffee, tea, liqueurs, ice cream and ready-to-drink coffee) in
grocery/warehouse stores contributed approximately 4% to revenue. Retail success in the US market has not been
matched in international markets. In fact, Starbucks Corp does not have any significant presence in the hot drinks
retail market outside North America. To improve its position in the global retail market for hot drinks would
require significant investment which the company is not expected to make.
Operational and distribution strategies

Starbucks Corp markets fresh coffee for at-home consumption through its outlets worldwide and through the online
Starbucks Store; however, neither of these channels generate significant sales.

In the US, the company has managed to break into the retail channel through a licensing agreement with Kraft
Foods. While the company could pursue distribution agreements in international markets this is unlikely as retail
sales are not core to the business.
Summary 1 Starbucks Corp: Key Facts
Company name & status:
Starbucks Corp
Headquarters:
USA
Sector involvement (2005):
Coffee, Tea
Region involvement (2005):
North America, Asia Pacific
World ranking (2005):
11
World % share (2005):
0.80
Website:
www.starbucks.com
Source:
Euromonitor International from company reports.
6
Performance by Region and by Sector
Hot Drinks Market Assessment
Performance in line with core North American market

Being a foodservice operation, which also sells fresh coffee for at-home consumption is a source of competitive
advantage for Starbucks Corp in the retail market. Leveraging such a well-recognised brand allows the company to
command a higher price for its retail products than other hot drinks manufacturers. However, while the global
market for hot drinks grew 9% in retail value terms in 2005, 11th ranked Starbucks Corp only managed to increase
retail sales by 7%. In North America (the company’s core market where it ranks third), Starbucks Corp’s
performance was in line with the hot drinks market (6%).

Starbucks Corp is highly dependent on the North American market, which accounts for approximately 98% of hot
drinks retail sales. However, only 12% of global hot drinks sales are in North America and future growth in the
region (2% CAGR, 2005-2010) is expected to be slower than world growth (3% CAGR over the same period).
Instant coffee outperforms fresh coffee

Of the top 10 companies in the hot drinks market only a few companies significantly outperformed the market.
Like Starbucks Corp both these companies are only present in coffee, but unlike Starbucks Corp which only offers
fresh coffee products, both Melitta and Tchibo also compete in fast-growing instant coffee. Instant coffee has
outperformed fresh coffee in terms of both volume and value growth between 2000 and 2005, a trend that is
expected to continue over the forecast period. Additionally both Tchibo and Melitta market coffee pod machines
(One:One and Cafissimo respectively).
Other hot drinks is the fastest growing sector in hot drinks

Other hot drinks has been the fastest growing hot drinks sector (6% CAGR between 2000 and 2005 compared to
5% for the overall hot drinks market, retail value sales). Despite offering Chantico Drinking Chocolate in its
foodservice outlets, Starbucks Corp does not offer this product for at-home consumption. While it would be
relatively simple for the company to package this product it is unlikely to push retail sales of hot drinks other than
coffee as this is not a core business area for Starbucks Corp.
Coffee
Competitive landscape

Of the top 10 coffee companies worldwide, Starbucks Corp (which ranked eighth in 2005) grew retail value sales
by the highest percentage between 2000 and 2005 (11% value CAGR compared to 5% for market leader Nestlé and
for second-placed Kraft Foods). While Starbucks Corp is growing sales at a slower rate (2000/2001 18% growth in
retail value terms, compared to 7% 2004/2005), this is to be expected following its phenomenal growth in the early
part of the review period.

In North America, the company’s key market, third-placed Starbucks (7% retail value growth 2004/2005, coffee) is
in line with the market (7%) and outperformed the top two players (Procter & Gamble 2%, Kraft -5%).
7
The coffee category is becoming increasingly competitive

On a global level, Starbucks fell behind coffee growth in 2004 and 2005 – a clear indication of the competitive
nature of the product.

Melitta, one of the company’s closest rivals, overtook Starbucks in terms of retail value sales of coffee in 2005. In
2005 Melitta coffee sales increased by US$75.5 million in comparison to Starbucks Corp’s growth of US$35.2
million. Unlike Starbucks, Melitta has a presence in all regions although Germany and Brazil account for the vast
majority of its value sales (92% in 2005) and drove growth over the last five years.

In comparison Starbucks only has a significant presence in North America in terms of retail sales. North America is
forecast to be the slowest growing region in terms of coffee value sales over the 2005-2010 period (2% CAGR)
which does not bode well for the company’s retail business.
Starbucks has a limited presence outside North America

If Starbucks is to take advantage of future growth in coffee it will need to turn its attention to the large developing
markets of Africa and the Middle East, Latin America and Asia-Pacific which will drive growth in coffee sales
over the forecast period.

Despite having foodservice outlets in 37 countries worldwide, Asia-Pacific is the only region besides North
America where the company has a share of the fresh coffee market (0.5% in 2005). This is solely due to retail sales
in Taiwan where Starbucks is the leading player in fresh coffee with almost a third of the market in value terms.
With 153 licensed outlets in Taiwan at the end of fiscal 2005, it appears that consumers buy into the concept of “the
Starbucks Experience”, perceiving the company’s coffee as a lifestyle rather than a commodity.
Smaller up-and-coming coffee companies pose a threat

Other up-and-coming coffee companies such as Strauss Elite, Segafredo and Eight O’Clock pose a threat to
Starbucks Corp. Although smaller than Starbucks Corp, all three companies outpaced Starbucks’s actual growth in
both volume and value terms in 2005.

The growth of Segafredo can be attributed to the 2005 acquisition of the US retail coffee business of Sara Lee. This
is a strategy Starbucks Corp has used in the past – in 2003 the company acquired Seattle Coffee Company, which
included both Seattle’s Best and Torrefazione Italia coffee brands.

Although Strauss Elite has a presence in both fresh and instant coffee in Western Europe, Eastern Europe and
Africa and the Middle East, recent growth has been driven by fresh coffee sales in Eastern Europe which along
with North America is forecast to be the slowest growing region over the 2005-2010 period.

Similarly to Starbucks Corp, Eight O’Clock sells fresh coffee in the US. However, unlike Starbucks brands, Eight
O’Clock is widely available through the grocery channel.

One common denominator that has the potential to affect all fresh coffee companies is the bean itself. As the
company does not maintain coffee plantations it purchases green coffee beans from regions throughout the world,
which is then processed at its US-based roasting plant. The company sources green coffee beans from external
trading companies and is thus subject to the volatility of coffee prices.
Prospects
Growth in fresh coffee beans
8

Fresh coffee beans and instant coffee are set to be the fastest growing coffee formats. While Starbucks Corp does
not offer any instant coffees, the company is well positioned to take advantage of the growth in fresh coffee beans.

Fresh coffee beans account for approximately two thirds of Starbucks Corp’s hot drinks retail sales and the
company ranks one globally in fresh coffee beans retail value, a position it has maintained since 2000. In 20042005 company growth (11% in retail value terms) outpaced the market (8%). However, third-placed Eight O’Clock
Coffee and fifth-placed Tchibo Holding outperformed Starbucks Corp, which should surely be a warning sign for
the company.
Translating presence in countries outside North America into retail sales

With a well-developed network of outlets across all regions of the world, it should be relatively easy for the
company to translate this position into retail sales of fresh coffee. However, as retail sales of coffee are such a small
part of the business in comparison to foodservice sales and as the company seems to be focusing on moving into
the entertainment arena the company is not expected to aggressively pursuing retail sales in regions other than
North America (where it has distribution agreements which enable consumers to purchase Starbucks fresh coffee in
grocery stores).

As the company becomes more established and the brand becomes more widely-recognised in regions other than
North America, retail sales in Starbucks outlets are expected to increase. However, these sales will remain
insignificant in relation to the company’s foodservice business.
Asia-Pacific remains an untapped market

Asia-Pacific has been the primary target for expansion with over half of all Starbucks outlets outside North
America in this region (almost 1,400 outlets in Asia-Pacific at the end of fiscal 2005).

China presents a unique opportunity for Starbucks as retail sales of fresh coffee are currently negligible in this
country. China is expected to be the fifth-fastest growing country globally in terms of retail value sales of coffee
over the 2005-2010 period. However, it remains to be seen whether Starbucks will be able to translate strong brand
equity and a high concentration of foodservice outlets into retail sales. Additionally, the company is up against two
strong competitors – Nestlé and Kraft are both well established in China jointly accounting for 86% of retail sales
of coffee in value terms in 2005.

With 572 outlets in Japan at the end of fiscal 2005, this is the company’s largest market outside the US. Despite the
café culture that is developing in Japan, retail sales do not reflect Starbucks’s presence in this market.

Instant coffee accounted for 63% of retail value sales in Japan in 2005. It is possible that Starbucks coffees are
considered a lifestyle product in Japan, i.e. while consumers enjoy the social aspect of spending time in a Starbucks
outlet they have not yet developed a taste for fresh coffee and will instead drink instant coffee at home. As Japan
becomes a more developed coffee-drinking nation, this will represent a distinct opportunity for Starbucks to
capitalise on the strong brand equity in Japan.
Co-branding a coffee pod machines could boost value sales

Co-branding a coffee pod machine would be another way for Starbucks Corp to push up value sales of fresh coffee.
Pod machines are usually developed by a coffee manufacturer (such as Starbucks Corp) in partnership with a
domestic electrical appliance manufacturer. Starbucks Corp already offers coffee presses and espresso machines for
sale in some of its foodservice outlets, thus the introduction of a coffee pod machine would be a natural progression
if the company could find a suitable partner. Once consumers purchase the machines they would be tied into
buying Starbucks coffee pods (as the machines are usually proprietary systems).
Tea
9
Competitive landscape
Starbucks hardly competes in tea

Tea is an area where Starbucks Corp hardly competes. Tea (2% CAGR 2005-2010 in value terms) is not expected
to see the same kind of growth as coffee (3% CAGR). However, certain tea categories such as other tea and
fruit/herbal tea are expected to witness even higher growth than fresh coffee beans (the fastest growing category in
coffee) largely due to the health benefits associated with these types of teas. Most of the growth in tea will occur in
Asia-Pacific where Starbucks currently does not have a presence in retail sales of tea.

All the challenges Starbucks Corp faces breaking into the retail channel with coffee are magnified in tea which is a
product people hardly associate with the Starbucks experience. Starbucks Corp has one tea brand - Tazo tea, which
was acquired in 1999.
Starbucks’s strong association with coffee may be holding back Tazo

Like Starbucks coffee, Tazo tea is sold in Starbucks outlets worldwide and in US grocery channels through a
distribution agreement with Kraft Foods. However, according to Euromonitor International, Canada is the only
country where retail sales of Tazo tea are significant, holding approximately 3% of both the green and fruit/herbal
tea markets in 2005. Tazo tea could well be held back by Starbucks Corp’s strong association with coffee. Why buy
a tea produced by a coffee company when you could buy a tea from a specialty tea manufacturer?
Prospects
Retail tea growth unlikely

While Starbucks has the product range via Tazo to enter the retail tea market more aggressively, the company’s
strategy is strongly focused on coffee with tea as a secondary offering to complement the range of hot drinks
offered in Starbucks outlets. It is unlikely that tea sales will become a significant part of Starbucks’s retail sales of
hot drinks.
Table 3
2005
Starbucks Corp: World Shares & Rankings in Hot Drinks by Sector 2004-
% retail value rsp
Coffee
Hot drinks
Source:
Note:
Table 4
Share
2004
Ranking
2004
Share
2005
Ranking
2005
Sector
Growth
2004/2005
Company
Growth
2004/2005
1.4
0.8
7
10
1.4
0.8
8
11
10.8
9.1
6.7
6.7
Euromonitor International
– Signifies no presence or negligible share
Starbucks Corp: World and Regional Shares in Hot Drinks by Sector 2005
% retail value rsp
WE
EE
NA
LA
As
Au
10
Coffee
Tea
Hot drinks
Coffee
Tea
Hot drinks
Source:
Key:
Note:
-
-
MEA
WO
-
1.4
0.8
8.4
0.1
6.3
-
0.2
-
-
Euromonitor International
WE=Western Europe; EE=Eastern Europe; NA=North America; LA=Latin America; As=Asia-Pacific; Au=Australasia;
Af/ME=Africa/The Middle East; WO=World
– Signifies no presence or negligible share
Brand Assessment
Brand Strategy

Starbucks Corp has four hot drinks brands available in retail channels: Starbucks, Seattle’s Best and Torrefazione
Italia fresh coffees and Tazo tea. Following the acquisition of Tazo Tea LLC in 1999, the company acquired Seattle
Coffee Company, which included both Seattle’s Best Coffee and Torrefazione Italia coffee brands, in 2003. As
well as being sold in Starbucks outlets, the four brands are available in the grocery channel in North America.
However, Starbucks is the company’s only brand that has a global presence.
Starbucks

Starbucks is a truly global brand. Through its phenomenal success in the US and its burgeoning success
internationally, it is widely recognised in countries where the company is yet to open stores. Part of the Starbucks
appeal (particularly in Asian countries) is the Americanism of the brand that resonates with consumers around the
world. The “Starbucks experience” epitomises the brand and is considered an affordable luxury.

The Starbucks brand portfolio is continually evolving with new coffee beverages being added to the menu in
Starbucks outlets. In terms of retail sales of coffee, the brand portfolio includes more than 30 blends and single
origin coffees. Starbucks Fair Trade coffee is available in 23 countries and the company is committed to socially
responsible coffee buying practices.

Because the company does not have any major distribution agreements outside North America, this region accounts
for over 95% of retail sales of Starbucks brand coffee. In line with accelerated international expansion, retail sales
through Starbucks outlets are expected to increase.
Table 5
Starbucks Corp: Starbucks Brand Shares in Hot drinks by Sector 2004-2005
% retail value rsp
Coffee
Hot drinks
Source:
Note:
Share
2004
Ranking
2004
Share
2005
Ranking
2005
Sector
Growth
2004/2005
Brand
Growth
2004/2005
1.4
0.8
11
16
1.4
0.8
12
17
10.8
9.1
6.4
6.4
Euromonitor International
– Signifies no presence or negligible share
11
Table 6
Starbucks Corp: Starbucks Regional Shares in Hot Drinks by Sector 2005
% retail value rsp
Coffee
Hot drinks
WE
EE
NA
LA
As
Au
-
-
8.2
6.1
-
0.2
-
-
MEA
Coffee
Hot drinks
Source:
Key:
Note:
Euromonitor International
WE=Western Europe; EE=Eastern Europe; NA=North America; LA=Latin America; As=Asia-Pacific; Au=Australasia;
Af/ME=Africa/The Middle East.
– Signifies no presence or negligible share.
Appendices
Financial Summary
Table 7
Starbucks Corp: Financial Summary 2002-2005
US$ million
Net sales
% growth of net sales
Operating profit
% growth of operating profit
Net profit
Operating margin (%)
Net margin (%)
Earnings per share (dollar)
Capital expenditure
Advertising expenditure
Total assets
Long-term debt
Shareholders' equity
Source:
Note:
2002
2003
2004
2005
3,289
4,076
24
421
34
265
10
7
0.33
427.2
49.5
2,776
5.1
2,069
5,294
30
607
44
389
11
7
0.47
412
68.3
3,387
4.4
2,470
6,369
20
781
29
494
12
8
0.61
440
87.7
3,514
3.6
2,091
313
210
10
6
0.26
375.5
25.6
2,249
5.8
1,712
Euromonitor International from company reports
Year end September
Company Background
12
Summary 2 Starbucks Corp: Historical Development
Year
Topic
Description
2007
Business agreements
Starbucks and PepsiCo works
together to enter the Chinese RTD
coffee market. The extension of
their joint venture into the country
has begun by selling bottled
Frappuccino coffee drinks through
retail stores, via PepsiCo's Chinese
distribution network.
2007
Other topics
Starbucks stops stockin Jones
Soda.
2007
Product launches
Starbucks Coffee and Dong Suh
Foods co-launch a new chilled
ready-to-drink coffee in South
Korea, named Starbucks
Discoveries, which will initially be
offered in two flavours, Seattle
Latte and Milano Espresso.
2006
Product launches
Starbucks promots its seasonal
drinks like peppermint mochas and
Christmas Blend coffee on
Thursday, and start giving away
small gifts like a movie ticket or
subway ride along with "Cheer
Passes" that track good deeds
during the season.
2006
Subsidiary established
Starbucksopens its first two stores
in Brazil. More stores are planned
as Starbucks hopes to repeat the
success it had in Mexico —
opening 105 shops in four years —
but the company admits that the
Brazilian market may be tough to
crack. The first stores opened at an
upscale mall in Sao Paolo.
2006
Corporate image
Starbucks defends its business
practices with poor coffee farmers
around the world after it was
accused of blocking the U.S.
trademark application of coffee
growers from Ethiopia.
2006
Distribution & logistics
Starbucks Corp. plans to offer
coffee and cocoa beverages
through vending machines in a joint
venture with PepsiCo Inc.
2006
Other topics
Starbucks reported in early
October that it had opened over
2,000 new retail locations during
the fiscal year ended 1 October
2006.
2006
Geographic expansion
Starbucks wants massively to
increase the number of coffee
shops it operates in Germany in an
attempt to step up the pace of
expansion in the country's growing
market.
13
2006
Business agreements
Starbucks and PepsiCo sign a
distribution agreement for Ethos
Water
2006
Business agreements
Starbucks Corp signs a jointventure agreement with Cafes
Sereia do Brasil Participacoes SA
to form Starbucks Brasil Comercio
de Cafes Ltda.
2006
Acquisitions
Starbucks Corp acquires 56
Barnie's Coffee & Tea outlets,
which are in regional malls around
the US.
2006
Business agreements
Starbucks choses Monex Trading
belonging to Turkish Alshaya
Group as a partner for
development of its business in
Russia.
2005
Brand extensions
Starbucks Coffee Company and
Jim Beam Brands are to launch a
cream liqueur brand together. The
roll out of Starbucks Cream Liqueur
follows the February launch of
Starbucks Coffee Liqueur.
2005
Geographic expansion
Starbucks Coffee Company has
launched its first ready-to-drink
coffee beverage outside of North
America in Asia. Starbucks
Discoveries(TM) coffee drink is a
fresh, ready-to-drink chilled cup
coffee featuring the high-quality
coffee customers expect from
Starbucks. Starbucks Discoveries
will initially be offered in two
flavors, Seattle (latte) and Milano
(espresso), and is available in the
refrigerated case of convenience
stores in the Tokyo metropolitan
area and nationally in select
convenience stores in Taiwan.
2005
Product launches
Starbucks Coffee Company will
celebrate the 10th anniversary of
its Frappuccino(R) blended
beverage by offering a fresh twist
on an iconic summer flavor
combination -- mint and chocolate.
2005
Business agreements
Starbucks plans its stepping in
Portugal via the Spanish restaurant
chain VIPS. VIPS is Starbucks’
partner for the Spanish and French
markets.
2005
Product launches
Starbucks recently launched its first
alcoholic drink, a coffee liqueur
called Starbucks Coffee Liqueur.
Made in collaboration with Jim
Beam Brands, the liqueur will be
sold in restaurants, bars and liquor
stores, not in Starbucks'
coffeehouses. Alcohol content is
20% by volume, or 40% proof. A
14
750 milliliter bottle will sell for about
US$23.
2005
Other topics
Excessively high rent forced
Starbucks to close Asia's largest
coffee shop in Myongdong,
downtown Seoul.
2005
Acquisitions
Starbucks acquires Ethos Water to
expand its line of beverages.
2005
Company established
Starbucks and Spanish partner
Grupo Vips are studying entering
the Portuguese market this year or
in 2006.
2005
Company established
Indonesia's PT Mitra Adi Perkasa
(MAPI.JK) will open its first
Starbucks coffee shop shared with
PT Bank Niaga (BNGA.JK) in the
country's capital of Jakarta.
2004
Acquisitions
Starbucks Coffee International has
acquired its licensed operations in
Germany from its partner,
KarstadtQuelle AG.
2004
Business agreements
Starbucks Coffee International, a
wholly owned subsidiary of
Starbucks and its Turkish licensee,
Shaya Kahve Sanayi Ve Ticaret AS
celebrates the opening of the first
two Starbucks retail locations in
Ankara.
2004
Distribution & logistics
Starbucks has tied up with India's
Tata Coffee Ltd for the purchase of
premium coffee beans.
2004
Other topics
Starbucks Corp. plans first price
hike in four years.
2004
Product launches
Starbucks to sell Salvadoran
speciality coffee.
2004
Subsidiary established
Starbucks wins a contract from
Puerto Rico's airport authority AdP
to open a store at the international
airport Luis Munoz Marin (LMM) in
San Juan.
2004
Subsidiary established
Starbucks opens two new outlets in
Turkey.
2004
Business agreements
Starbucks Japan starts granting
licences to open shops in areas
such as stations and airports as
part of its business expansion.
2004
Product launches
Starbucks Coffee Co. introduces a
new line of low-calorie ice-blended
beverages.
2004
Subsidiary established
Starbucks to open an outlet in
Beijing Capital International Airport.
2004
Acquisitions
Starbucks signs an agreement to
acquire a 49.9% stake in its
Malaysian licensee Berjaya Coffee
Company (M) Sdn Bhd.
15
2004
Business agreements
The Starbucks Coffee International
arm of Starbucks Coffee Co.
acquires the chain’s 35 licensed
coffeehouses in Singapore from
Bonvests Holdings Ltd.
2004
Business agreements
Tazo Tea Company (Portland, OR,
USA) and Kraft Foods Global, Inc.
(Tarrytown, NY, USA) sign a new
licensing agreement to accelerate
the growth of the super-premium
tea brand into grocery channels
across the US.
2004
Acquisitions
Starbucks increased its stake in its
Shanghai and Taiwan joint venture
with President Coffee from 5% to
50%.
2004
Subsidiary established
Starbucks opens coffee shops at
the rate of about 3½ a day
worldwide, and that figure could
increase, according to chief
executive Orin Smith. The longterm plan is to have about 25,000
stores worldwide.
2004
Product launches
Starbucks is to team up with wine
and spirits group Jim Beam Brands
to develop and market a Starbucks
branded coffee liqueur drink. Both
companies have a good track
record for innovation and joint
ventures, but the release of the
liqueur drink will bring them into a
highly competitive liqueur category.
2004
Distribution & logistics
Tazo Tea Co., a unit of Starbucks
Corp. (SBUX.O), reaches an
agreement with Kraft Foods Inc.
(KFT.N) to bring Tazo's tea
products to more U.S. grocery
stores.
2004
Product launches
Starbucks Coffee International
plans to promote the traditional
Turkish coffee in seven Middle
East countries.
2004
Other topics
Rising milk costs may lead
Starbucks Corp. to consider its first
systemwide price increase in
nearly four years.
2004
Subsidiary established
Starbucks opens first music café in
US.
2004
Product launches
Starbucks offers a smooth, new
Guatemalan coffee exclusively to
the fine-dining segment.
2004
Product launches
Launches Starbucks Barista Digital
Italia fully automatic home
espresso machine.
2004
Distribution & logistics
Plans to open 30 Irish outlets.
2004
Company established
Starbucks opens Starbucks Coffee
Agronomy Co. in San Jose, Costa
16
Rica. to support Starbucks' rapid
growth plans, the office was
established to help ensure the
future supply of high-quality,
sustainable green coffee from
existing and potential sources in
Central America.
2004
Environmental profile
Starbucks launches the Starbucks
Coffee Agronomy Company in
Costa Rica in a bid to guarantee
the quality and even supply of its
coffee.
2004
Subsidiary established
Starbucks opens first outlet in Paris
France in Jan 2004.
2003
Company established
Starbucks Coffee Espana SL
opens its twelfth shop in Madrid
and now has 18 shops in Spain.
The company is targeting 100
shops by end 2006, having opened
its first Spanish coffee house in
2002.
2002
Product launches
The company has launched Vanilla
After Coffee Mints in addition to
peppermint and cinnamom flavours
as well as After Coffee Gum.
2002
Brand extensions
White 'Crème Frappuccino'
launched in the US.
2002
Other topics
Starbucks enters Spanish market
with 2 stores in Madrid. The
company has set up a joint venture
agreement with Grupo Vips and
Molí Vell called: Tres Estrellas
Unidas SL.
2002
Business agreements
The first Starbucks store is
scheduled to open in Mexico City
by the end of this year, through a
joint-venture agreement between
Starbucks and SC de Mexico, S.A.
de C.V., an affiliate of fast food
franchiser Alsea S.A. de C.V.,
2001
Business agreements
Starbucks is to open a series of
coffee shops in Germany, after
signing a deal with German retailer
KarstadtQuelle AG. The first store
is due to open in Berlin in spring
2002. Some 180 branches are
expected to be created by 2005.
Source:
Euromonitor International
Summary 3 Starbucks Corp: Subsidiaries 2005
Company
Country
Chengdu Starbucks Coffee Co Ltd
China
Coffee Concepts (Guangdong) Ltd
China
Coffee Concepts (Shenzhen) Ltd
China
17
Coffee Concepts (Southern China) Ltd
Hong Kong, China
Emerald City CV
Netherlands
Olympic Casualty Insurance Company
USA
Qingdao American Starbucks Coffee Co Ltd
China
Rain City CV
Netherlands
SBI Nevada Inc
USA
SCI Europe I Inc
USA
SCI Europe II Inc
USA
SCI Investment Inc
USA
SCI Ventures SL
Spain
Seattle Coffee Co
USA
Seattle Coffee Company (International) Limited
United Kingdom
Seattle's Best Coffee Co
-
Starbucks (Shanghai) Supply Chain Co Ltd
China
Starbucks Asia Pacific Investment Holding Limited
Hong Kong, China
Starbucks Asia Pacific Investment II Holding Limited
Hong Kong, China
Starbucks Asia Pacific Investment III Holding Limited
Hong Kong, China
Starbucks Capital Asset Leasing Company
USA
Starbucks Card Europe Ltd
United Kingdom
Starbucks Coffee (Dalian) Company Limited
China
Starbucks Coffee (Deutschland) GmbH
Germany
Starbucks Coffee (Ireland) Limited
Ireland
Starbucks Coffee (Thailand) Ltd
Thailand
Starbucks Coffee Agronomy Company SRL
Costa Rica
Starbucks Coffee Asia Pacific Limited
Hong Kong, China
Starbucks Coffee Canada Inc
Canada
Starbucks Coffee Company (Australia) Pty Ltd
Australia
Starbucks Coffee Company (UK) Ltd
United Kingdom
Starbucks Coffee EMEA BV
Netherlands
Starbucks Coffee Holdings (UK) Limited
United Kingdom
Starbucks Coffee International, Inc
USA
Starbucks Coffee Singapore Pte Ltd
Singapore
Starbucks Coffee Trading Company Sarl
Switzerland
Starbucks Global Card Services Inc
USA
Starbucks Holding Company
USA
Starbucks Management Consultancy (Shanghai) Co
Ltd
China
Starbucks Manufacturing Corporation
USA
Starbucks Manufacturing EMEA BV
Netherlands
Starbucks New Venture Company
USA
Starbucks US Brands LLC
USA
18
Sur-Andino Café SA
-
Torrefazione Italia LLC
USA
Torz & Macatonia Limited
United Kingdom
Urban Coffee Opportunities LLC
USA
Source:
Euromonitor International
Summary 4 Starbucks Corp: Hot Drinks Brands 2005
Brand Name
Sector and subsector(s)
Starbucks
Coffee (Coffee; Fresh coffee; Fresh coffee beans;
Fresh ground coffee)
Starbucks
Source:
Hot drinks
Euromonitor International
Summary 5 Starbucks Corp: Websites
Name
Country
Website address
Main corporate website
USA
www.starbucks.com
Source:
Euromonitor International
19