Starbucks Corporate

Shi Heping FNCE 213 Entrepreneurial Finance Group 2 Submitted to Prof Thong Tiong Yang 10/26/2010

09 Billion Employment 142000 1. while. It retails high-quality whole bean coffees. Partner Resources (Human Resources) Vivek Varma : Executive vice president. CIO and general manager Digital Ventures Kalen Holmes : Executive vice president. Italian-style espresso beverage.98% Return on Equity 14.8 Million Return on Assets 6. Corporate Profile Starbucks specializes in retailing specialty coffee and other beverages around the world. Public Affairs 1. 1.3 Business Areas The three operating segments under Starbucks: United States. licensed stores has grown by 181 since June of last year to 7928.Starbucks Corporation 1. various complementary food items. International. Global Development Michelle Gass : President. Starbucks Coffee U. As of June 2010. CFO and CAO Paula Boggs : Executive vice president. worldwide. John Culver : President. 73% 2 . president and CEO Cliff Burrows : President. Global Supply Chain Operations Stephen Gillett : Executive vice president. general counsel and secretary Peter Gibbons : Executive vice president.1 Key Statistics for FY2009 Net Revenue US$ 9.2 Key Executives Howard Schultz : Chairman. and beverage-related accessories and coffee brewing equipments.S. Seattle’s Best Coffee Annie Young: CMO Scrivner Troy Alstead : Executive vice president.12% P/E Ratio 37. CPG. Starbucks operates 8809 company-operated stores. 774. Starbucks Corporation was founded in 1985 and it is listed on NASDAQ Global Select Market. 19% US. fresh-brewed coffees. reduced by 173 compared with stores in June 2009. 8% International.6 Million Net Income US$ 390. Below is the contribution of each segment to net revenue in 2009. Global Consumer Products.06 Market Cap US$ 21. and Global Consumer Products. Starbucks Coffee International Jeff Hansberry : President. Foodservice Arthur Rubinfeld : President.

company-operated retail revenue is still in decline year over year under adverse impact of ongoing underperformed US economy. With concern about profitability. Specialty operations comprise of licensed retail stores and other initiatives associated with core business. Worldwide Operations Currently. 2. Specialty operations are running in over 50 countries. Canada. complementary food. Their coffee brewing equipment and merchandise are sold in company-operated retail stores in the UK. whole bean coffees. the company is closing down some unprofitable stores to reduce unnecessary expenses. Moreover. and some other markets. Even though operating margin has expanded due to lower operating expenses and occupancy costs.000 companyoperated stores worldwide in 2009 and 2010. 3 . International operating segment sells almost the same products as in the US. CPG includes two source of revenue. Its foodservice revenue comes from the US foodservice business by selling products to institutional foodservice companies. and producing and selling a range of ready-to-drink beverages contribute to CPG’s licensing revenue. and coffee-related equipment and merchandise mostly in company-operated stores. Starbucks has 16737 stores in more than 50 countries either through company operation or licensing. Starbucks decided to close approximately 1. There are 5606 international stores and 11131 stores in the US. namely licensing and foodservice. The company expects to continue to expand to more areas in emerging markets and higher contributions from existing areas of business. Selling a selection of whole bean and ground coffees and premium Tazo® teas.United States International Global Consumer Product Group (CPG) This operating segment offers coffee and other beverages.

competition from new and existing stores in different areas can be fierce.  Dunkin’ Brands.3. Starbucks as well owns large amounts of copyrights and patents for certain products.: it is a leading quick-service franchisor that operates in more than 40 countries with 15000 franchise locations. 2009. they also need to compete with well-established coffee wholesale brands. and gift items Fresh Food Baked pastries. Starbucks also operates Farmer Support Centers in Costa Rica and Rwanda to sustain future supply of high-quality coffees and to strengthen Starbucks’ leadership position in the coffee industry.  McDonald’s Corporation: quick-service fast food retailer with worldwide appearance operated 32.  Brand equity: Starbucks enjoys a strong and healthy brand image with worldwide recognition. roasting and packaging under its stringent standards. beverage-related accessories. 3.  Harmony relations with employees: Starbucks maintains good relations with its employees and keeps a strong bargaining power towards its employees.478 stores in 117 countries in Dec. and wellness products over the world.  Numerous local specialty coffee beverage stores: as Starbucks operate in more than 50 countries. The biggest competitors for ready-to-drink coffee beverage sales are McDonald’s and various brands under Yum! Brands. health. oatmeal and yogurt parfaits 3.3 Key competitive strengths  Premium product quality: Starbucks promises to delivery only the finest whole bean coffees and coffee beverage by controlling coffee purchasing. It also provides various brands of coffee worldwide. salads. coffee mugs.1 Key Competitors Starbucks faces direct competition from quick-service restaurants and specialty coffee shops. books. Italian-style espresso beverages beverages. Inc.2 Key Products Starbucks provides over thirty single-origins and blends premium coffees. Competition 3. As the company also has whole bean coffees and ground packaged coffees product line. music.45 Million on technical research and development activities to improve products and service quality. 4 Coffee . sandwiches. VivannoTM smoothies and Tazo® teas Merchandise Coffee brewers and grinders.  Research and Development: Starbucks spends an average of US$6.  Trademarks and Patents: The Company owns and is able to renew numerous trademarks and service marks in the United States and in many other countries around the world with different durations. It owns Dunkin’ Donuts and Baskin-Robbins chains. Handcrafted Rich-brewed coffee.  Nestle SA: a major provider of nutrition. fruit cups. packaged goods.

legal. even the cost of rising or accessing existing funds could increase dramatically. after adjusting operating lease into liability. uncertainties in developing countries become more of a concern. uncertainties in regulations. and economy. and eventually could lead to credit rating downgrade. As Starbucks has positioned itself as the third place between home and workplace where people can get together.9% which could put Starbucks into unfavorable financial position.4. Therefore. Moreover. which could adversely affect financial results. 5 . regarding foreign currency exchange rate fluctuations. which would harm Starbucks’ financial condition and limit the Company’s available financing. its operating result is facing downward pressure from reduced average value per transaction. it would cause severely negative impact on store operation in term of traffic. the company has a debt/asset ratio of 113. As a result. As Starbucks expands its business internationally. and intellectual property and contract rights. however. as the Company depends on consumer discretionary spending. even negative. For Starbucks’ long-term growth expectation. Starbucks stores have experienced a relatively lower. which counts for 73% of total net income in FY2009.4%. the convenience of human connection may become what people avoid when the region is going through a health pandemic. Significant Corporate Developments 1971 • First store open in Seattle 1987 • First store opens outside Seattle area in Chicago & Vancouver 1992 • IPO & common stock traded on NASDAQ National Market 1996 • Joins with Pepsi-Cola to sell its first ready-to-drink beverage 2002 • Signs licensing agreements with national Fair Trade organizations 2004 • Opens 1st farmer support center in Costa Rica 5. Assessment Assessment High dependence on financial performance in US may negatively affect operating performance in the US segment and eventually the company as a whole International operations may be adversely impacted by international market risks A regional or global health pandemic could have severely influence over the company’s business Reduction in cash flow may lead to increased existing relatively high leverage Strategic Insights/Action The Company highly relies on the US operating segment. under unfavorable economy condition. However. Starbucks has a debt/asset ratio of 45. its financial performance is more reliant on international environment. any reduction in cash flow will lead to a higher level of leverage. traffic. As a consequence.

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