Full Description

Starbucks Corporation (Starbucks) together with its subsidiaries purchases and roasts whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, complementary food items, a selection of premium teas, and coffee-related accessories and equipment, through Company-operated retail stores. Starbucks also sells coffee and tea products and licenses its trademark through other channels. Starbucks produces and sells a range of ready-to-drink beverages. The business segments of the Company are United States, International and Global Consumer Products Group (CPG). The United States and International segments include Company-operated retail stores and certain components of specialty operations. The CPG segment includes packaged coffee and tea sold globally through channels, such as grocery stores and operates through joint ventures and licensing arrangements with consumer products business partners.

Company-operated Retail Stores

Starbucks retail stores are located in high-traffic, high-visibility locations. Because the Company can vary the size and format, its stores are located in or near a variety of settings, including downtown and suburban retail centers, office buildings and university campuses. The Company also locates retail stores in select rural and off-highway locations to serve a range of customers outside metropolitan markets. During the fiscal year ended September 28, 2008 (fiscal 2008), the Company operated approximately 2,800 drive-thru locations. In fiscal 2008, the Company opened 681 company-operated stores. The Starbucks stores offer regular and decaffeinated coffee beverages, a selection of Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages, and a selection of premium teas and packaged roasted whole bean coffees. Starbucks stores also offer a range of fresh food items. Food items include pastries, prepared breakfast and lunch sandwiches, and salads, as well as sodas, juices, and bottled water.

Specialty Operations

During fiscal 2008, Starbucks licensed retail stores were opened in the United States. The Company’s United States licensees operated 4,329 stores in fiscal 2008. During fiscal 2008, 550 international licensed stores were opened. In fiscal 2008, the Company’s International operating segment had a total of 3,134 licensed retail stores.

The Company, through a licensing relationship with Kraft Foods, Inc. (Kraft), sells a selection of Starbucks and Seattle’s Best Coffee branded packaged coffees and Tazo teas in grocery and warehouse club stores throughout the United States. Kraft manages all distribution, marketing, advertising and promotion of these products. The Company sells packaged coffee and tea internationally both directly to warehouse club customers, such as Costco, and through a licensing relationship with Kraft in Canada and the United Kingdom. In fiscal 2008, the Company’s coffees and teas were available in approximately 37,000 grocery and warehouse club stores, with 33,000 in the United States and 4,000 in international markets.

The Company licenses the rights to produce and market Starbucks branded products through several partnerships both domestically and internationally. The licensing agreements include The North American Coffee Partnership, a joint venture with the Pepsi-Cola Company in which Starbucks is a 50% equity investor, manufactures and markets ready-to-drink beverages, including bottled Frappuccino beverages and Starbucks DoubleShot espresso drinks; licensing agreements for the manufacturing, marketing and distribution of Starbucks Discoveries, a ready-to-drink chilled cup coffee beverage, in Japan and South Korea; a licensing agreement established in August 2008 with Unilever and Pepsi-Cola Company for the manufacturing, marketing and distribution of Starbucks super-premium Tazo Tea ready-to-drink beverages in the United States and Canada, and the International Coffee Partnership, another joint venture with the Pepsi-Cola Company, to manufacture, market and distribute ready-to-drink beverages internationally, which includes bottled Frappuccino beverages in China and Mexico.

Foodservice

The Company sells whole bean and ground coffees, including the Starbucks and Seattle’s Best Coffee brands, as well as a selection of premium Tazo teas and other related products, to institutional foodservice companies that service business and industry, education, healthcare, office coffee distributors, hotels, restaurants, airlines and other retailers. The Company’s direct accounts are through national broadline distribution networks with SYSCO Corporation and US Foodservicetm. Starbucks foodservice sales, customer service and support resources are aligned with those of SYSCO Corporation and US Foodservice.