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COMPANY PROFILE Starbucks Corporation REFERENCE CODE: E86AFA79-07E1-4115-AA0C-0016416541FE PUBLICATION DATE: 9 May 2014 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED. Starbucks Corporation TABLE OF CONTENTS TABLE OF CONTENTS Company Overview..............................................................................................3 Key Facts...............................................................................................................3 Business Description...........................................................................................4 History...................................................................................................................6 Key Employees...................................................................................................14 Key Employee Biographies................................................................................16 Major Products and Services............................................................................24 Revenue Analysis...............................................................................................26 SWOT Analysis...................................................................................................27 Top Competitors.................................................................................................36 Company View.....................................................................................................37 Locations and Subsidiaries...............................................................................40 Starbucks Corporation MarketLine Page 2 Starbucks Corporation Company Overview COMPANY OVERVIEW Starbucks Corporation (Starbucks or 'the company') is a premier roaster, marketer and retailer of specialty coffee. The company operates in 62 countries across North America, Asia Pacific, the Europe, Middle East and Africa (EMEA), and Latin America. Starbucks is headquartered in Seattle, Washington and employed approximately 182,000 people as of September 29, 2013. The company recorded revenues of $14,892.2 million in the financial year ended September 2013 (FY2013), an increase of 12% over FY2012. The operating loss of the company was $325.4 million in FY2013, compared to an operating profit of $1,997.4 million in FY2012. The net profit was $8.3 million in FY2013, compared to the net profit of $1,383.8 million in FY2012. KEY FACTS Head Office Starbucks Corporation 2401 Utah Avenue South Seattle Washington 98134 USA Phone 1 206 447 1575 Fax Web Address http://www.starbucks.com/ Revenue / turnover 14,892.2 (USD Mn) Financial Year End September Employees 182,000 NASDAQ Global Select Ticker SBUX Starbucks Corporation MarketLine Page 3 Starbucks Corporation Business Description BUSINESS DESCRIPTION Starbucks is a global coffee retail chain that specializes in coffee and other related beverages. The company purchases, roasts and sells whole bean coffees along with handcrafted coffee, tea and other beverages and a variety of fresh food items, through its 19,767 retail stores in 62 countries. The company also sells a variety of coffee and tea products and licenses its trademarks through other channels such as licensed stores, grocery and national foodservice accounts. Some of the key brands under which the company offers its products include Starbucks, Teavana, Tazo Tea, Seattle's Best Coffee, Starbucks VIA Ready Brew, Starbucks Refreshers (beverages), Evolution Fresh, La Boulange (bakery products) and Verismo (coffee makers). The company operates through four segments: the Americas, channel development, EMEA and China/Asia Pacific (CAP). Across the Americas, EMEA and CAP regions, Starbucks sells coffee and other beverages, complementary food, packaged coffees, single serve coffee products and a selection of merchandise through company-operated stores and licensed stores. The Americas and EMEA segments also include foodservice accounts, primarily in Canada and the UK. The Americas segment also includes the company's La Boulange stores. The channel development segment sells whole bean and ground coffees as well as a range of premium Tazo teas and Starbucks and Tazo-branded single serve products, globally. The segment also produces and sells a variety of ready-to-drink beverages, such as Starbucks Refreshers beverages, and other branded products through various channels including grocery stores, warehouse clubs, specialty retailers, convenience stores, and US foodservice accounts. In terms of revenue generation, the company has four channels: company-operated stores, licensed stores, consumer packaged goods (CPG) and foodservice operations. Starbucks company-operated retail stores are located in high-traffic, high-visibility locations, such as downtown and suburban retail centers, office buildings, university campuses, and in select rural and off-highway locations. The company also operates drive-thru retail stores to provide a greater degree of access and convenience for its non-pedestrian customers. The company-operated stores offer a choice of regular and decaffeinated coffee beverages, a wide range of Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages, premium teas, roasted whole bean and ground coffees, a variety of Starbucks VIA Ready Brew soluble coffees, Starbucks coffee and Tazo tea K-Cup portion packs, and Starbucks Refreshers beverages. The company-operated stores also offer a variety of fresh food items, such as pastries, prepared breakfast and lunch sandwiches, oatmeal and salads, as well as juices and bottled water. The company-operated stores also sell a variety of beverage-making equipment and accessories apart from providing free access to wireless internet. By the end of FY2013, the company had a total of 10,194 company-operated stores across the world. Starbucks Corporation MarketLine Page 4 Starbucks Corporation Business Description The licensed-stores are operated in combination with the company's local partners, while each of them leverages the respective operating and store development experiences. As part of licensing agreements with prominent retailers in the market, the company receives royalties and license fees and sells coffee, tea and related products for resale in licensed locations. For Teavana and Seattle's Best Coffee brand, as well as Starbucks in the UK, the company uses traditional franchising. By the end of FY2013, the company had 5,415 licensed stores in the Americas, 1,116 in the EMEA region and 2,976 in the CAP region. It also had 28 Teavana stores and 38 Seattle's Best Coffee stores. CPG includes both domestic and international sales of packaged coffee and tea as well as a variety of ready-to-drink beverages and single-serve coffee and tea products to various retail channels such as grocery, warehouse club and specialty retail stores. It also includes revenues from product sales to and licensing revenues from manufacturers that produce and market Starbucks and Seattle's Best Coffee branded products through licensing agreements. Through the foodservice channel, the company sells Starbucks and Seattle's Best Coffee whole bean and ground coffees, a selection of premium Tazo teas, Starbucks VIA Ready Brew, and other coffee and tea related products to institutional foodservice companies that service business and industry, education, healthcare, office coffee distributors, hotels, restaurants, airlines and other retailers. The company also sells the Seattle's Best Coffee branded products through arrangements with national accounts. Key customers in this channel are SYSCO Corporation, US Foodservice, and other distributors. Starbucks Corporation MarketLine Page 5 Starbucks Corporation History HISTORY Starbucks was founded in the early 1970s; it opened its first location in Seattle's Pike Place in 1971. Starbucks began providing coffee to restaurants and espresso bars in 1982. The company introduced Starbucks Christmas Blend in 1984. With the backing of local investors, Il Giornale, a coffeehouse chain, acquired Starbucks' assets and changed its name to Starbucks Corporation in 1987. In the same year, the company also opened its stores in Chicago and Vancouver, Canada. Starbucks became the first privately-owned US company to offer a stock option program that included part-time employees, in 1991. In the following year, it completed initial public offering with common stock being traded on the NASDAQ National Market under the symbol SBUX. Starbucks began selling compact discs in 1995. In the same year, the company opened a roasting facility in York, Pennsylvania and formed an alliance with the Canada-based Chapters Bookstore, to make its coffee available at the bookstore. Starbucks partnered with Pepsi-Cola North America to sell bottled Frappuccino coffee drink in 1996 and, later in the same year, the company opened its first store in Japan. In 1997, Starbucks formed an alliance with eight companies expanding its book-store offering through the All Books for Children book drive. In the same year, the company introduced Starbucks Barista home espresso machine. The company signed a licensing agreement with Kraft Foods (now Mondelez International) in 1998 to extend the Starbucks brand into grocery channels across the US. Later in the year, the company acquired Tazo, a tea company based in Portland, Oregon. The company also launched its website www.starbucks.com in 1998. Starbucks acquired Hear Music, a San Francisco-based music company, in 1999. In the same year, Starbucks partnered with Conservation International to promote sustainable coffee growing practices. In 2000, Starbucks established a licensing agreement with TransFair USA for the sale of Fairtrade certified coffee in the US and Canadian markets. The company introduced the Starbucks Card, a stored-value card for customers to use and reload, in 2001. In the following year, the company introduced Starbucks DoubleShot espresso drink in the ready-to-drink category. Later in 2002, the company launched its high-speed wireless internet service branded TMobile HotSpot in the US stores. During 2003, Starbucks enhanced its portfolio with the acquisition of Seattle Coffee. This included the Seattle's Best Coffee and Torrefazione Italia Coffee brands. The company continued its global expansion in early 2004 with the opening of the first Starbucks store in Paris. The company also opened Starbucks Coffee Agronomy in San Jose, Costa Rica in the same year. Further in 2004, Starbucks Coffee, a Starbucks subsidiary, and Jim Beam Brands, a unit of Fortune Brands (now Starbucks Corporation MarketLine Page 6 Starbucks Corporation History Beam), entered into an agreement to develop, manufacture and market a Starbucks-branded coffee liqueur product in the US. Later in the year, Seattle's Best Coffee signed a licensing agreement with Borders Books & Music to open Seattle's Best Coffee cafes in more than 400 existing and new Borders stores in the continental US and Alaska. Starbucks acquired Ethos Water, a privately held bottled water company based in Santa Monica, California, in 2005. In the following year, Starbucks acquired full ownership of Coffee Partners Hawaii, a joint-venture company that operated its retail stores in Hawaii. The company also acquired full ownership of Cafe del Caribe, the joint-venture company that operated its retail stores in Puerto Rico. The company also acquired majority ownership of operations in Beijing and Tianjin from H&Q Asia Pacific and other shareholders of High Grown Investment Group. The company and its European joint venture partner, Marinopoulos Holding SARL, opened the first Starbucks store in Bucharest in 2007. In the same year, Starbucks launched its new ready-to-drink coffee beverage, Starbucks Discoveries, in South Korea. The company also formed a music partnership with Apple in late 2007. Starbucks acquired The Coffee Equipment Company and its proprietary Clover brewing system in 2008. In the same year, Starbucks was ordered to pay California Baristas more than $100 million for violation of the California Labor Code (in connection with a class-action lawsuit filed in 2004). In mid-2008, Starbucks and SSP, one of the leading companies in beverage and food concessions for travelers in Europe, collaborated to form a strategic licensing partnership to open more than 150 Starbucks stores in prime travel channels in key European markets. In 2009, a class-action lawsuit was filed against Starbucks by an employee for laptop data breach. Subsequently, Starbucks and Kraft Foods announced plans to launch packaged Starbucks coffee products in France and Germany markets. Later in the year, the company and Microsoft and the National Broadcasting Company (MSNBC) formed a marketing relationship to highlight Starbucks coffee products on Morning Joe, the cable network's morning program. The program features interviews with top newsmakers and politicians and in-depth analysis of the day's biggest stories. In 2009, Starbucks recalled its coffee grinder products due to laceration hazard issues faced by consumers. Also in 2009, the company launched 'Just Pure Flavor', an innovation for fresh brewed coffee that offers customizable flavor by the cup. In early 2010, the company announced plans to enter the ready-to-drink coffee category in Europe. Additionally, Starbucks also signed an agreement with Arla Foods for the manufacture, distribution and marketing of Starbucks-branded premium ready-to-drink coffee beverages in Europe. Subsequently, Starbucks recalled its glass water bottles due to laceration hazard. Starbucks and Mac's Convenience Stores (Mac), a subsidiary of Alimentation Couche-Tard, entered into a long term agreement in 2010. As per this agreement, Mac will expand the product offering of Starbucks Seattle's Best Coffee brew from its then 290 convenience stores across four provinces in Western Canada to another 600 locations across Ontario, Canada. Starbucks Corporation MarketLine Page 7 Starbucks Corporation History Further in 2010, Starbucks and Arla Foods entered into an agreement to offer Starbucks-branded ready-to-drink beverages in Europe and the UK, and introduce Starbucks Discoveries chilled coffee and Starbucks Doubleshot espresso drink in the UK and German markets. In the same year, the company launched Starbucks VIA coffee essence in Japan. The company entered into an agreement with Ajinomoto General Foods in 2010. Under the agreement, Ajinomoto General Foods would sell the company's instant coffee and other products for home consumption at supermarkets and other retailers in Japan. Later in the same year, Starbucks acquired 100% interest in Cafes Sereia do Brasil Participacoes, a Brazil-based owner and operator of cafes, in line with its commitment to grow its international business. The company also acquired the remaining 50% stake of Magic Johnson Enterprises in Urban Coffee Opportunities. During the same year, Starbucks discontinued its agreement with Kraft Foods and assumed full responsibility for the sales and distribution of its packaged coffee products. Starbucks and Tata Coffee signed a non-binding memorandum of understanding in early 2011 to collaborate for sourcing and roasting green coffee beans at Tata Coffee's Coorg facility in India. Around the same time, Starbucks launched mobile payment facility in all of its US company-operated stores. The facility allowed customers to pay for their in-store purchases through select smart phones. The company entered into an agreement with Courtesy Products (one of the leading providers of in-room coffee service to hotels in the US) to offer Starbucks ground coffees in approximately 500,000 luxury and premium hotel rooms across the US. Later in 2011, Seattle's Best Coffee and Delta Air Lines entered into an agreement to offer Seattle's Best Coffee in Delta Air Lines' domestic and international flights. Also in 2011, Starbucks entered into a strategic partnership with Green Mountain Coffee Roasters (GMCR), a producer of specialty coffee and coffee makers, to manufacture, market, distribute and sell Starbucks and Tazo Tea branded K-Cup portion pack for use in GMCR's Keurig Single-Cup brewing system. The company also launched the following new product offerings globally: Cocoa Cappuccino, Starbucks Petites, Starbucks Tribute Blend and Starbucks VIA Ready Brew Tribute Blend. Further in 2011, Starbucks, with joint venture partner Corporacion de Franquicias Americanas, opened its first store in Guatemala. The company also introduced its latest additions to Starbucks Digital Network in partnership with Yahoo! in the same year. The company launched its Starbucks VIA Ready Brew product at all of its stores in China in 2011. Around the same time, the company opened its first fully-owned Starbucks store in Amsterdam, the Netherlands. With this new store, the company marked the start of a phased entry into high street locations in Amsterdam. Later in 2011, Starbucks launched its However-You-Want-It Frappuccino, a line of personalized blended beverages, globally. Prior to the global launch, these blended beverages were sold only in the US and Canada. Starbucks, along with Arla Foods, launched Starbucks premium ready-to-drink iced coffees, Starbucks Iced Latte, Starbucks Doubleshot Espresso and Milk and Starbucks Bottled Frappuccino drinks on grocery shelves and in convenience stores throughout Finland in 2011. Additionally, the company expanded the availability of its Seattle's Best Coffee to more than 50,000 locations across the US and Canada. Starbucks Corporation MarketLine Page 8 Starbucks Corporation History Further in 2011, Starbucks signed a contractual agreement with Maxim's Caterers, its long time joint-venture partner in South China, including Hong Kong and Macau, to acquire a 100% equity of its business in the Chinese provinces of Guangdong, Hainan, Sichuan, Shaanxi and Hubei, and the municipality of Chongqing. Following this, the company acquired full control of more than half of the Starbucks retail stores in Mainland China, Hong Kong and Macau markets. The company launched the Starbucks for Android mobile application providing more consumers access to the fastest way to pay and other features to manage their Starbucks Card on-the-go. The company also launched Starbucks for iPhone, an application that introduces its Card eGift feature on a mobile device for the first time and also combines the features of its two applications for iPhone and iPod touch, myStarbucks and Starbucks Card Mobile. In an attempt to develop China's Yunnan Province as a coffee growing region, Starbucks signed a memorandum of understanding with Ai Ni Group, one of Yunnan Province's most established coffee operators and agricultural companies. As part of this, Starbucks and Ai Ni Group formed a joint-venture company that will purchase and export Arabica Yunnan coffee beans, as well as operate dry mills in the Yunnan Province. Additionally, in line with its strategy to focus on its international businesses, the company acquired 100% ownership and operating control of Starbucks Coffee Switzerland and Starbucks Coffee Austria through the acquisition of its joint-venture partner Marinopoulos Holdings' shares in Starbucks-Marinopoulos Holdings B.V. Later in 2011, the company announced the expansion of its Starbucks VIA Ready Brew coffee to six additional countries in Asia. Following the announcement, Starbucks stores in South Korea, Indonesia, Malaysia, Singapore, Thailand and Australia will carry Starbucks VIA Ready Brew in Colombia and Italian Roast flavors. In the same year, Seattle's Best Coffee announced the addition of two more new locations. The two newest cafes form a part of nearly 100 Seattle's Best Coffee retail locations in the US and Canada. In an effort to strengthen its presence in the health and wellness space, Starbucks acquired Evolution Fresh, a US-based company that produces artisanal super-premium fruit juices, fresh-cut fruits and vegetables and gourmet soups and salsas, in 2011. Towards the end of 2011, Starbucks expanded its presence in Mainland China with the opening of new stores in five new cities: Langfang (Hebei Province), Zhengzhou (provincial capital of Henan Province), Harbin (provincial capital of Heilongjiang Province), Xiangtan (Hunan Province) and Zhoushan (Zhejiang Province). During the same time, Starbucks, in partnership with Alshaya Morocco (a subsidiary of M.H.Alshaya), opened two new stores in Morocco. In the beginning of 2012, the company launched Organic Ethiopia Sidamo coffee, one of the world's well-known coffees for its distinctive lemon flavors. Around the same time, Autogrill Group and Starbucks, which started their co-operation in the US in 1991, extended their global partnership to develop new business in Europe. Starbucks entered into a strategic partnership with Tata Global Beverages Limited to enter the Indian coffee retail market. As part of the 50:50 joint venture named TATA Starbucks Limited, Tata Global Beverages will own and operate Starbucks cafes in various cities across India, which will be branded as Starbucks Coffee 'A Tata Alliance'. Besides this, the company also signed a separate sourcing and roasting agreement with Tata Coffee Limited, according Starbucks Corporation MarketLine Page 9 Starbucks Corporation History to which Tata Coffee Limited will roast coffee to supply TATA Starbucks Limited, and export to Starbucks Coffee Company. Further in 2012, the company entered into a partnership with Target Canada, the Canadian arm of the US-based retailer, according to which the majority of Target retail stores across Canada will feature Starbucks licensed stores. During the same time, Starbucks and its licensed partner, SSP opened Norway's first Starbucks Coffeehouse at the Oslo Airport. Starbucks opened its first concept store in Europe in the center of Amsterdam in 2012. The company introduced the Verismo system by Starbucks, its first at-home premium single cup machine, in the same year. The company also introduced the first Evolution Fresh store and renovated the brand's look to reflect the pure, natural ingredients in each beverage. The new store opening and refreshed branding positions Evolution Fresh as a leader in the $3.4 billion and growing cold-crafted juice category and furthers its commitment to evolve and enhance the customer experience with innovative and wholesome products. In an initiative to cater to the needs of its on-the-go customers, the company launched its first drive-thru store in Chicago. Through the new store, the company offers coffee beverages, freshly-baked food items and other car-friendly sandwiches and snacks. Also in the same year, Starbucks and GMCR expanded their strategic relationship for the manufacturing, marketing, distribution and sale of Starbucks-branded Vue packs for use in GMCR's newly-introduced Keurig Vue Brewer. In the second quarter of 2012, Starbucks announced the limited release of Starbucks Reserve Organic Galapagos San Cristobal Coffee at select Starbucks retail locations. This selection is harvested from the farm Hacienda 'El Cafetal', which only produces a small lot of 4,000 bags of coffee each year. During the same time, Starbucks and Walt Disney Parks and Resorts announced that Starbucks will be available at all Disney theme parks at Disneyland Resort in Anaheim, California, and Walt Disney World Resort in Lake Buena Vista, Florida. The company announced the availability of Evolution Fresh bottled beverages at select Starbucks locations in Seattle. Starbucks launched two new Frappuccino beverages for the summer, Mocha Cookie Crumble and Chocolate Cookie Crumble Creme, in 2012. In the same year, the company announced the opening of its first store in Finland at Helsinki Airport. In mid-2012, Starbucks entered into a definitive agreement to acquire San Francisco-based Bay Bread and its La Boulange bakery brand, and to hire French baker Pascal Rigo. Around the same time, Coinstar and Seattle's Best Coffee signed an exclusive agreement to roll out Coinstar's new Rubi coffee kiosk in the grocery, drug and mass merchant retail channels featuring Seattle's Best Coffee beverages. Later in 2012, Starbucks began construction of its first company-owned manufacturing facility in the world to produce soluble products in Georgia. The company launched its handcrafted Starbucks Refreshers beverages, made from green coffee extract and real fruit juice around the same time. The company made Starbucks Refreshers beverages available in Very Berry Hibiscus and Cool Lime flavors at participating Starbucks stores in the US and Canada, as well as 15 markets internationally. Subsequently, Starbucks acquired 100% ownership interest in Bay Bread and its La Boulange bakery brand. This acquisition further expanded the company's food offering. In the third quarter of 2012, the company signed a new partnership with Selecta, a vending services company, Starbucks Corporation MarketLine Page 10 Starbucks Corporation History to launch Starbucks Office Coffee in Switzerland. During the same time, Starbucks and Umoe Restaurant Group, one of the largest chains of service establishments in Scandinavia, signed a strategic partnership to open Starbucks stores across the Scandinavian region. In the same year, Tata Starbucks Limited, the 50:50 joint venture between Starbucks and Tata Global Beverages Limited, opened the first Starbucks store in India. Towards the end of 2012, Seattle's Best Coffee opened a new small footprint drive-thru and walk-up only store in Seattle. Around the same time, Starbucks acquired Teavana Holdings, a specialty tea and tea accessory retailer. The acquisition is the newest addition to Starbucks' emerging brands portfolio, which also includes Evolution Fresh, La Boulange, Seattle's Best Coffee and Tazo. Starbucks opened its first store in Vietnam, following an expanded long-term relationship with Hong Kong Maxim's Group, in January 2013. In the following month, Starbucks and Tata Coffee Limited opened a roasting and packaging plant in Karnataka, India. This new facility enables roasting and packaging of green coffee beans for Starbucks stores in India and over time in select markets around the world. Further in the same month, Seattle's Best Coffee and Inventure Foods, a specialty food manufacturer, entered into a partnership to launch Seattle's Best Coffee Frozen Coffee Blends, the first blend-at-home frozen coffee beverage, across grocery stores and mass retailers within the US. In April 2013, Starbucks announced plans to open 100 new stores in Indonesia over the next three years and another 100 stores in the Philippines over the next four years, to expand its presence in Southeast Asia. In May 2013, Starbucks and GMCR expanded their strategic partnership for the manufacturing, marketing, distribution and sale of Starbucks and Tazo-branded single serve packs for use in GMCR's Keurig single serve brewing systems globally. In the same month, the company launched its first Starbucks community store outside of the US, in the Langsuan neighborhood of Bangkok, Thailand. Approximately 10% of sales from Starbucks hand-crafted beverages at this store will be directed to the farming communities of Northern Thailand. Further in May 2013, Seattle's Best Coffee opened 10 drive-thrus throughout Dallas/Fort Worth. The company introduced calorie information on menu boards at all company-operated and licensed US Starbucks stores in June 2013. The menu board labeling and pastry case calorie labeling complements the food and beverage transparency the company provides to customers through printed brochures, a nutrition tab on Starbucks.com and through the Starbucks Mobile App for iPhone. In the same month, Starbucks announced plans to open 100 new stores in Malaysia over the next four years. In July 2013, the company and Danone, a producer of fresh dairy products, announced a strategic agreement to offer a jointly created and developed range of new, healthy specialty yogurt products in Starbucks stores and in grocery channels. This agreement will expand Starbucks' health and wellness offerings for its customers under the Evolution Fresh brand. In the same month, Starbucks selected Google to provide the next generation of its Wi-Fi offering for its customers. In August 2013, the company along with Salling, a Dansk Supermarked department store, opened the first Starbucks store in Jutland. These companies plan to open additional stores in Denmark, the fourth biggest coffee consuming country in the world. In the same month, Starbucks announced plans to open its first cafe in Colombia by 2014. Starbucks stores in Colombia will be operated through a joint venture between two of Starbucks business partners in the Latin America regionAlsea Starbucks Corporation MarketLine Page 11 Starbucks Corporation History and Grupo Nutresa. Further in August 2013, the company launched its Evolution Fresh cold-pressed juice and Evolution Harvest snacks for the first time at Whole Foods Market, a supermarket in the US. The company opened two flagship stores in China and a new store within the Galeries Lafayette department store in Paris in September 2013. In October 2013, Starbucks opened a new Evolution Fresh juicery in Rancho Cucamonga, California, featuring the most advanced technology, including High Pressure Processing (HPP) machines. This facility will increase the brand's production of cold-pressed, never-heated juice by four times. Tata Starbucks created a special India sourced coffee, India Estates Blend, marking its first anniversary in the Indian market. La Boulange Cafe & Bakery voluntarily initiated a product recall of 75 Soft Caramel Jams in 8.4 oz. jars as a precautionary measure in November 2013. This product was sold exclusively in 20 La Boulange Cafe & Bakery stores in the San Francisco Bay area. The recall was initiated after it was discovered by the company that the product was inadvertently mislabeled and filled with Hazelnut Jam (containing undeclared hazelnut). In December 2013, Starbucks, in partnership with Tar.Ca, opened its first store in Monaco. In January 2014, the company expanded its latte portfolio with the launch of the new handcrafted Starbucks caramel flan latte and Starbucks VIA Vanilla Latte and Caffe Mocha in Starbucks stores across the US and Canada. In the same month, Starbucks Canada launched Tweet-a-Coffee, the first Twitter gifting program. Through this program, registered Starbucks account customers across Canada can send a $5 Starbucks Card eGift through Twitter. Starbucks also launched New Reserve Ethiopia Sun-Dried Yirgacheffe coffee in January 2014. Bodum USA recalled 28,000 coffee presses sold exclusively at Starbucks due to the risk of laceration and burn hazards, in January 2014. Further in the month, the company released an update to its iOS app that protects customer's personal information stored on the phone. In February 2014, Evolution Fresh initiated a voluntary product recall of approximately 1,700 bottles of organic sweet greens and ginger juice sold by grocery retailers in California and Nevada as a small number of these juices with best by dates of March 2, 2014 were swollen. In the same month, TAZO announced the launch of three organic teas, Organic Earl Grey Noir, Organic Earl Grey Blanc and Organic Sultry Strawberry, exclusively at Whole Foods, a natural and organic foods supermarket chain. Gretchen's Shoebox Express initiated a voluntary recall of a small number of Greek yogurt raspberry and lemon parfaits sold under the Starbucks brand in Seattle and Portland, in March 2014. The products were recalled due to the presence of eggs, an allergen. In the same month, Keurig Green Mountain and Starbucks Coffee Company amended terms to their existing five-year agreement. The companies updated their agreement to continue to expand Starbucks range of K-Cup pack offerings and to promote expanded consumer choice as Keurig continues to build its Keurig brewing system. In exchange for eliminating the super-premium coffee exclusivity terms of the existing agreement Starbucks will receive improved business terms, including significantly expanded Starbucks K-Cup pack and variety types. Starbucks Corporation MarketLine Page 12 Starbucks Corporation History Seattle's Best Coffee, a part of Starbucks Coffee Company, was launched in select partner cafes in the UK, in April 2014. Starbucks Corporation MarketLine Page 13 Starbucks Corporation Key Employees KEY EMPLOYEES Name Job Title Board Howard Schultz Chairman, President and Chief Executive Officer Executive Board William W. Bradley Director Non Executive Board 238335 USD Robert M. Gates Director Non Executive Board 239996 USD Mellody Hobson Director Non Executive Board 239996 USD Kevin R. Johnson Director Non Executive Board 239996 USD Olden Lee Director Non Executive Board 239996 USD Joshua Cooper Ramo Director Non Executive Board 239996 USD James G. Shennan, Jr. Director Non Executive Board 239996 USD Clara Shih Director Non Executive Board 239996 USD Javier G. Teruel Director Non Executive Board 239996 USD Myron E. Ullman, III Director Non Executive Board 233446 USD Craig E. Weatherup Director Non Executive Board 233446 USD Scott Maw Executive Vice President and Chief Senior Management Financial Officer Troy Alstead Chief Operating Officer Senior Management 3022298 USD Clifford Burrows Group President, the Americas, EMEA and Teavana Senior Management 3546534 USD John Culver Group President, CAP, Channel Senior Management Development and Emerging Brands 3805045 USD Arthur Rubinfeld Chief Creative Officer and President, Senior Management Global Development and Evolution Fresh Retail Blair Taylor Chief Community Officer and Executive Vice President, Partner Resources Senior Management Adam Brotman Chief Digital Officer Senior Management Curt Garner Chief Information Officer Senior Management Sharon Rothstein Global Chief Marketing Officer Senior Management Matthew Ryan Global Chief Strategy Officer Senior Management Lucy Lee Helm Executive Vice President, General Counsel and Secretary Senior Management Michael Conway Executive Vice President, Global Channel Development Senior Management Starbucks Corporation MarketLine Compensation 17242507 USD Page 14 Starbucks Corporation Key Employees Name Job Title Board Deverl Maserang Executive Vice President, Global Supply Chain Senior Management Vivek Varma Executive Vice President, Public Affairs Senior Management Craig Russell Executive Vice President, Global Coffee Senior Management Marissa Andrada Senior Vice President, Global Partner (Human) Resources Senior Management Jeff Hansberry President, CAP Senior Management Annie Young-Scrivner Executive Vice President and President, Teavana Senior Management Starbucks Corporation MarketLine Compensation 2417002 USD Page 15 Starbucks Corporation Key Employee Biographies KEY EMPLOYEE BIOGRAPHIES Howard Schultz Board: Executive Board Job Title: Chairman, President and Chief Executive Officer Since: 2008 Age: 60 Mr. Schultz has been the President and Chief Executive Officer at Starbucks since 2008 and the Chairman of the Board since 1985. He is also the Founder of the company. From 2000 to 2005, Mr. Schultz also served as the Chief Global Strategist at the company. Previously, he served as the Chairman and Chief Executive Officer at Starbucks from 1985 to 2000. During 1986-87, Mr. Schultz served as the Chairman of the Board, Chief Executive Officer and President at Il Giornale Coffee Company, a predecessor to Starbucks. Prior to that, from 1982 to 1985, he was the Director of Retail Operations and Marketing at Starbucks Coffee Company, a predecessor to the company. William W. Bradley Board: Non Executive Board Job Title: Director Since: 2003 Age: 70 Mr. Bradley has been a Director at Starbucks since 2003. He has also been a Managing Director at Allen & Company since 2000. From 2001 to 2004, Mr. Bradley served as the Chief Outside Advisor to McKinsey & Company's non-profit practice. He served as a Senior Advisor and Vice Chairman of the International Council at JP Morgan & Co. from 1997 to1999. During the same period, Mr. Bradley worked as an Essayist for CBS Evening News and was a visiting Professor at Stanford University, the University of Notre Dame and the University of Maryland. He served in the US Senate from 1979 to 1997. Mr. Bradley also served as a Director at Seagate Technology and Willis Group Holdings and currently serves on the Board of Directors at QuinStreet. Robert M. Gates Board: Non Executive Board Job Title: Director Since: 2012 Age: 70 Mr. Gates has been a Director at Starbucks since 2012. He served in numerous roles in the Executive Branch of the US government for nearly half a century, most recently as the Secretary of Defense Starbucks Corporation MarketLine Page 16 Starbucks Corporation Key Employee Biographies from 2006 to 2011. In 2011, Mr. Gates was named the Chancellor of the College of William & Mary. From 2002 to 2006, he also served as the President of Texas A&M University. He was previously a member of the Board of Directors at several companies, including Brinker International, NACCO Industries, Parker Drilling Company and the Board of Independent Trustees of the Fidelity Funds. Mellody Hobson Board: Non Executive Board Job Title: Director Since: 2005 Age: 44 Ms. Hobson has been a Director at Starbucks since 2005. She has been the President and a Director at Ariel Investments since 2000, the Chairman since 2006 and a Trustee of Ariel Mutual Funds since 1993. Ms. Hobson served as a Senior Vice President and the Director of Marketing at Ariel Capital Management from 1994 to 2000 and as the Vice President of Marketing from 1991 to 1994. Currently, she also serves as the Chairman at DreamWorks Animation, and as a Director at The Estee Lauder Companies and Groupon. Kevin R. Johnson Board: Non Executive Board Job Title: Director Since: 2009 Age: 53 Mr. Johnson has been a Director at Starbucks since 2009. He has also been the Chief Executive Officer at Juniper Networks from 2008 to 2013. Prior to that, Mr. Johnson served as the President of Platforms and Services division at Microsoft. He also serves as a Director at Juniper Networks. Olden Lee Board: Non Executive Board Job Title: Director Since: 2003 Age: 72 Mr. Lee has been a Director at Starbucks since 2003. He served as the Interim Executive Vice President, Partner Resources at Starbucks from 2009 to 2010. Mr. Lee previously served at PepsiCo for 28 years in various positions, including Senior Vice President of Human Resources for Taco Bell division and Senior Vice President and Chief Personnel Officer for KFC division. He retired from PepsiCo in 1998. Since 1998, Mr. Lee has served as Principal of Lee Management Consulting, a management consulting firm he founded. Starbucks Corporation MarketLine Page 17 Starbucks Corporation Key Employee Biographies Joshua Cooper Ramo Board: Non Executive Board Job Title: Director Since: 2011 Age: 45 Mr. Ramo has been a Director at Starbucks since 2011. He is the Vice Chairman at Kissinger Associates, a strategic advisory firm where he has been employed since 2005. Mr. Ramo was previously the Managing Partner and a Senior Advisor for the Office of John L. Thornton, a corporate advisory specialist and an advisor to Goldman Sachs, from 2003 to 2005. He also served as Senior Editor and Foreign Editor at TIME magazine from 1996 to 2003. Mr. Ramo also serves on the Board of Directors at FedEx Corporation. James G. Shennan, Jr. Board: Non Executive Board Job Title: Director Since: 1990 Age: 72 Mr. Shennan has been a Director at Starbucks since 1990. He served as a General Partner at Trinity Ventures from 1989 to 2005, when he became General Partner Emeritus. Prior to joining Trinity Ventures, Mr. Shennan served as the Chief Executive at Addison Consultants, and two of its predecessor companies. Clara Shih Board: Non Executive Board Job Title: Director Since: 2011 Age: 32 Ms. Shih has been a Director at Starbucks since 2011. She is the Chief Executive Officer and a Board member at Hearsay Social, an enterprise software company she co-founded in 2009. From 2006 to 2009, Ms. Shih served as the Product Management Director of AppExchange at salesforce.com, an enterprise software company. From 2004 to 2006, she served as an Associate of Strategy and Business Operations for Google. Previously, Ms. Shih was a Software Engineer at Microsoft Corporation. Javier G. Teruel Board: Non Executive Board Job Title: Director Starbucks Corporation MarketLine Page 18 Starbucks Corporation Key Employee Biographies Since: 2005 Age: 63 Mr. Teruel has been a Director at Starbucks since 2005. He served as the Vice Chairman at Colgate-Palmolive Company from 2004 to 2007. Prior to being appointed the Vice Chairman, Mr. Teruel served as Colgate-Palmolive's Executive Vice President responsible for Asia, Central Europe, Africa and Hill's Pet Nutrition. He also served as the Vice President of Body Care in Global Business Development in New York, and as the President and General Manager at Colgate-Mexico. Mr. Teruel was also the President at Colgate-Europe, and the Chief Growth Officer responsible for the company's growth functions. Currently, he serves as a Director at J.C. Penney Company and the Nielsen Company B.V. Myron E. Ullman, III Board: Non Executive Board Job Title: Director Since: 2003 Age: 67 Mr. Ullman has been a Director at Starbucks since 2003. He has also been the Chief Executive Officer at J.C. Penney Company since 2013. Mr. Ullman served as the Executive Chairman at J.C. Penney Company from 2011 to 2012 and as the Chairman of the Board and Chief Executive Officer from 2004 to 2011. Previously, he served as Directeur General, Group Managing Director at LVMH Moet Hennessy Louis Vuitton from 1999 to 2002, as the Chairman and Chief Executive Officer at DFS Group from 1995 to 1999 and as the Chairman and Chief Executive Officer at R.H. Macy & Co from 1992 to 1995. Currently, he serves as the Chairman at the Federal Reserve Bank of Dallas. Craig E. Weatherup Board: Non Executive Board Job Title: Director Since: 1999 Age: 68 Mr. Weatherup has been a Director at Starbucks since 1999. He worked with PepsiCo for 24 years and served as the Chief Executive Officer of its worldwide Pepsi-Cola business and as the President at PepsiCo. Mr. Weatherup also led the initial public offering at The Pepsi Bottling Group, where he served as the Chairman and Chief Executive Officer from 1999 to 2003. Currently, he also serves as a Director at Macy's. Scott Maw Board: Senior Management Job Title: Executive Vice President and Chief Financial Officer Starbucks Corporation MarketLine Page 19 Starbucks Corporation Key Employee Biographies Since: 2014 Mr. Maw has been an Executive Vice President and the Chief Financial Officer at Starbucks since February 2014. Prior to this, he served as the Senior Vice President of Corporate Finance at the company. Mr. Maw joined Starbucks as Global Controller in 2011. Prior to joining the company, he served as the Chief Financial Officer at SeaBright Insurance Company from 2010 to 2011. Mr. Maw served as the Chief Financial Officer of the Consumer Banking division of JPMorgan Chase & Co from 2008 to 2010. From 1994 to 2003, he served in various finance leadership positions at General Electric Company, including Chief Financial Officer for GE Insurance Holdings. Troy Alstead Board: Senior Management Job Title: Chief Operating Officer Since: 2014 Age: 50 Mr. Alstead has been the Chief Operating Officer at Starbucks since February 2014. Prior to this, he served as the Chief Financial Officer and the Group President of Global Business Services at Starbucks from 2013. He previously served as the Chief Financial Officer and Chief Administrative Officer at the company from 2008 to 2013. Mr. Alstead also served as the Chief Operating Officer, Starbucks Greater China in 2008, as the Senior Vice President, Global Finance and Business Operations from 2007 to 2008, and as the Senior Vice President, Corporate Finance from 2004 to 2007. Mr. Alstead joined the company in 1992. Clifford Burrows Board: Senior Management Job Title: Group President, the Americas, EMEA and Teavana Since: 2013 Age: 54 Mr. Burrows has been the Group President, the Americas, EMEA and Teavana at Starbucks since 2013. He previously served as the President of the Americas region at the company from 2011 to 2013 and as the President, Starbucks Coffee US from 2008 to 2011. Mr. Burrows also served as the President, Starbucks Coffee EMEA from 2006 to 2008. He joined Starbucks in 2001 as the Managing Director, UK. Prior to joining Starbucks, Mr. Burrows served as the Managing Director at Habitat Design, a furniture and housewares retailer. John Culver Board: Senior Management Job Title: Group President, CAP, Channel Development and Emerging Brands Since: 2013 Starbucks Corporation MarketLine Page 20 Starbucks Corporation Key Employee Biographies Age: 53 Mr. Culver has been the Group President, CAP, Channel Development and Emerging Brands at Starbucks since 2013. Prior to that, he was the President of Starbucks Coffee CAP from 2011 to 2013, the President of Starbucks Coffee International from 2009 to 2011 and the President of Starbucks Coffee Asia Pacific from 2007 to 2009. Mr. Culver also served as the President, Global Consumer Products and Foodservice at the company in 2009. Before joining Starbucks in 2002, he served as the Vice President of Sales at Nestle USA. Arthur Rubinfeld Board: Senior Management Job Title: Chief Creative Officer and President, Global Development and Evolution Fresh Retail Since: 2012 Mr. Rubinfeld has been the Chief Creative Officer and President, Global Development and Evolution Fresh Retail at Starbucks since 2012. He joined the company in 1992 and served in various positions until 2002. In 2002, he founded AIRVISION, an advisory firm specializing in brand positioning. Mr. Rubinfeld rejoined Starbucks in 2008 to lead global store development. Blair Taylor Board: Senior Management Job Title: Chief Community Officer and Executive Vice President, Partner Resources Since: 2013 Mr. Taylor has been the Executive Vice President, Partner Resources at Starbucks since 2013 and the Chief Community Officer since 2012. Prior to joining the company, he served as the President and Chief Executive Officer of the Los Angeles Urban League, where he was involved in several community engagement programs, such as Neighborhoods@Work, a holistic community reform model. In the past, Mr. Taylor also served as the Executive Vice President of College Summit from 2002 until 2005, a national college access initiative. His private-sector experience includes four years as the President and Chief Executive Officer at COI/ICD, a retail franchising company focused on low income communities in the US and the Caribbean. He also has more than eight years of experience in various leadership roles at PepsiCo and IBM. Adam Brotman Board: Senior Management Job Title: Chief Digital Officer Since: 2012 Mr. Brotman has been the Chief Digital Officer at Starbucks since 2012. Previously, he served as the Senior Vice President and general Manager, Starbucks Digital Ventures. Prior to joining Starbucks Starbucks Corporation MarketLine Page 21 Starbucks Corporation Key Employee Biographies in 2009, Mr. Brotman held several key leadership positions at digital media companies, including Chief Executive Officer at Barefoot Yoga Company, and Senior Vice President at Corbis. He also founded PlayNetwork, a provider of in-store digital media and entertainment services for businesses worldwide. Curt Garner Board: Senior Management Job Title: Chief Information Officer Since: 2012 Mr. Garner has been the Chief Information Officer at Starbucks since 2012. Mr. Garner joined Starbucks in 1998 as the Director of International Information Technology. During his tenure with Starbucks, he has served in a number of roles. Most recently, he served as the Senior Vice President of Business Technology, supporting retail technology as well as international technology. Sharon Rothstein Board: Senior Management Job Title: Global Chief Marketing Officer Since: 2013 Ms. Rothstein has been the Global Chief Marketing Officer at Starbucks since 2013. Previously, she served as the Senior Vice President of Marketing at Sephora, a specialty beauty retailer. Prior to Sephora, Ms. Rothstein held senior marketing and brand management positions at Godiva, Starwood Hotels and Resorts, and Procter & Gamble. Matthew Ryan Board: Senior Management Job Title: Global Chief Strategy Officer Since: 2013 Mr. Ryan has been the Global Chief Strategy Officer at Starbucks since 2013. He previously served as the Senior Vice President of Global Brand, Franchise and Customer Relationship Management at The Walt Disney Company. Prior to joining The Walt Disney Company in 1998, Mr. Ryan held senior strategic planning roles with several national and international advertising agencies. Lucy Lee Helm Board: Senior Management Job Title: Executive Vice President, General Counsel and Secretary Since: 2012 Starbucks Corporation MarketLine Page 22 Starbucks Corporation Key Employee Biographies Age: 56 Ms. Helm has been the Executive Vice President, General Counsel and Secretary at Starbucks since 2012. Previously, she served as the Senior Vice President and Deputy General Counsel from 2007. Ms. Helm served as the Vice President, Assistant General Counsel from 2002 to 2007 and as Director, Corporate Counsel from 1999 to 2002. During her tenure at Starbucks, she led various teams of the Starbucks legal department, including the Litigation and Brand protection team, the Global Business (Commercial) team and the Litigation and Employment team. Prior to joining Starbucks, Ms. Helm was a Principal at the Seattle law firm of Riddell Williams from 1990 to 1999. Starbucks Corporation MarketLine Page 23 Starbucks Corporation Major Products and Services MAJOR PRODUCTS AND SERVICES Starbucks is a premier roaster, marketer and retailer of specialty coffee. The company's key products include the following: Products: Coffees: Blended coffees Single-origin premium Arabica coffees Handcrafted beverages: Fresh-brewed coffee Hot and iced espresso beverages Frappuccino coffee Non-coffee blended beverages Smoothies Tazo teas Merchandise: Coffee and tea brewing equipment Mugs and accessories Packaged goods Music Books Gift items Fresh food: Baked pastries Sandwiches Salads Oatmeal Yogurt parfaits Fruit cups Consumer products: Whole bean coffees and teas Ground coffees and teas Tea filter bags Starbucks Corporation MarketLine Page 24 Starbucks Corporation Major Products and Services Tea latte concentrates Ready-to-drink teas and coffees Bottled iced and juiced teas Ice creams in premium coffee and coffee-free flavors Brands: Starbucks Coffee Tazo Tea Seattle's Best Coffee Torrefazione Italia Coffee Starbucks VIA Ready Brew Starbucks Refreshers Frappuccino Evolution Fresh La Boulange Teavana Verismo Starbucks Corporation MarketLine Page 25 Starbucks Corporation Revenue Analysis REVENUE ANALYSIS Overview The company recorded revenues of $14,892.2 million in FY2013, an increase of 12% over FY2012. For FY2013, the US, the company's largest geographic market, accounted for 76.7% of the total revenues. Starbucks generates revenues through four business segments: the Americas (73.9% of the total revenues in FY2013), channel development (9.5%), EMEA (7.8%) and CAP (6.2%). The remaining 2.6% of revenues were derived from the other operations not attributable to any segment. These include Seattle's Best Coffee, Evolution Fresh and Digital Ventures business. Revenues by segment In FY2013, the Americas segment recorded revenues of $11,000.8 million, an increase of 10.7% over FY2012. The channel development segment recorded revenues of $1,420.7 million in FY2013, an increase of 9.9% over FY2012. The EMEA segment recorded revenues of $1,160 million in FY2013, an increase of 1.6% over FY2012. The CAP segment recorded revenues of $917 million in FY2013, an increase of 27.1% over FY2012. Revenues by geography The US, Starbucks' largest geographical market, accounted for 76.7% of the total revenues in FY2013. Revenues from the US reached $11,415 million in FY2013, an increase of 12.2% over FY2012. Other countries accounted for 23.3% of the total revenues in FY2013. Revenues from other countries reached $3,477.2 million in FY2013, an increase of 11.4% over FY2012. Starbucks Corporation MarketLine Page 26 Starbucks Corporation SWOT Analysis SWOT ANALYSIS Starbucks is a premier roaster, marketer and retailer of specialty coffee. Through its various value-added services, the company not just sells coffee but also creates a differentiating coffee-drinking experience to its in-store customers and meets their unstated needs, which, in turn, helps it in surviving in the highly competitive foodservice retail space. However, increasing competition may lead to price wars, which, in turn, could affect the market share of the company. Strengths Weaknesses Building strong customer connect through value-added services Leveraging technology to build a robust distribution channel strategy Strong financial position Product recalls Tax evasion and lawsuits Opportunities Threats Entry into the health and wellness space Growing presence in key Asian markets Expanding presence in the growing single-serve coffee market in the US The growing office coffee marketplace Intense competition Compliance costs associated with government regulations Strengths Building strong customer connect through value-added services Starbucks operates in the highly competitive foodservice retail space that demands consistent delivery of quality service to either retain existing customers or to attract new ones. Apart from selling its world-renowned coffee blends in a variety of flavors, the company is focused on providing a coffee-drinking experience to its in-store customers. In the past several years, the company has been focusing on meeting its customers' unstated demands by offering various value-added services, such as entertainment on premises. Starbucks offers free, instant and unlimited Wi-Fi connectivity at all its company-owned stores across the US and Canada. The customers, who come for a drink or a snack, are encouraged to spend more time inside the store through free access to internet and the Starbucks Digital Networka news and entertainment web portal offered in association with Yahoo.com. The Starbucks Digital Network also offers free access to subscription editions of various premium news resources, such as The Wall Street Journal, New York Times, USA Today, The Economist and ESPN Insider. It also Starbucks Corporation MarketLine Page 27 Starbucks Corporation SWOT Analysis offers exclusive iTunes downloads and e-book downloads for its in-store customers. Apart from these in-store experiences, the company also targets customers by up-selling merchandise including music, movies, apparel, books and accessories. To further improve its in-store experience for customers, in July 2013, Starbucks selected Google to provide the next generation of its Wi-Fi offering for its customers. Beginning August 2013, the new US company-operated Starbucks stores will begin to receive up to 10 times faster network and Wi-Fi speeds. Over the next 18 months, Starbucks will convert more than 7,000 US stores to the upgraded store network and Wi-Fi experience. In addition to providing faster Wi-Fi, Starbucks and Google will also work together to co-develop the next-generation Starbucks Digital Network. While the company's strategy is to build stronger customer connect, through these initiatives it is also able to gain a higher footfall as more and more customers walk in for the exclusive in-store experiences. Additionally, Starbucks is able to create a unique selling proposition by combining its customized coffee blends with in-store experiences that customers look forward to. All these strategies are aiding the company in building its competitive advantage. Leveraging technology to build a robust distribution channel strategy While operating in the vast food service space, Starbucks is required to build a robust distribution strategy to stay ahead of its competition. In terms of distribution, the company sells through four channels: company-operated retail stores, licensed stores, CPG and foodservice operations. In the recent times, the company has been expanding its distribution network to include as many channels to reach customers where they work, travel, shop and dine. Besides the traditional distribution channels, the company has been utilizing digital channels such as internet and mobile applications, to reach its customers. In the beginning of 2011, Starbucks launched its mobile payment application at all of its 6,800 company-owned stores and 1,000 stores operated by Target in the US market. This application allows customers to pay for their in-store purchases through select smartphones. The Starbucks Card Mobile App displays a barcode that can be used just like a Starbucks Card to make a purchase. To pay, customers need to hold the mobile device in front of a scanner on the countertop and scan the Starbucks Card Mobile App's on-screen barcode to make a purchase. The application also allows customers to track rewards and reload balance using PayPal. After extensive testing, it was found to be an efficient and quick way to process payments at the company's stores. According to Starbucks, there is a demand for such a type of payment service. Over one-third of its customers use a smartphone and one in five uses a Starbucks card at checkout. In mid-2011, the company launched Starbucks for iPhone, a mobile application that introduces its popular Starbucks Card eGift feature on a mobile device and also combines the features of its two popular applications for iPhone and iPod touchmyStarbucks and Starbucks Card Mobile. The new application allows customers to access their favorite Starbucks Card features, use the mobile payment capability and track their My Starbucks Rewards and custom Starbucks features in a single application. The new application also allows customers to send a mobile gift. On the same lines, Starbucks also launched a mobile application for Android-based smartphones, Starbucks for Android application. The Android application provides consumers access to the fastest way to pay and other features to Starbucks Corporation MarketLine Page 28 Starbucks Corporation SWOT Analysis manage their Starbucks Card on-the-go. Following the success of these mobile applications, Safeway, the US-based retail supermarket chain, rolled out mobile payment at nearly 1,000 Starbucks in Safeway supermarkets across the US in 2011. In 2012, the company began accepting Square Wallet, a mobile payment application offered by the American company Square Incorporated. The new service was made available at approximately 7,000 Starbucks stores across the US. Starbucks became the first retailer in the US to combine its own mobile payment technology with a loyalty program, with the launch of Starbucks Card Mobile App in 2011. Currently, the company generates more than three million mobile transactions each week in the US, accounting for approximately 10% of total US tender. In addition, the total Starbucks Card transactions, including both physical card and mobile application purchases, constitute more than 30% of the company's US payments. Starbucks also began integrating the Starbucks Card and My Starbucks Rewards loyalty program across several of its brands, including Teavana.The registered customers who make purchases with a Starbucks Card or through the Starbucks mobile application will receive various benefits depending on the number of stars they earn. At the end of October 2012, the company had 4.5 million active members. By leveraging technology, the company is not just reaching out to an expanding base of consumers, but also is offering them a more convenient way of making transactions. Furthermore, these strategic initiatives will allow Starbucks to break through its traditional distribution channels, increase the addressable market and add new avenues for revenue generation. Strong financial position The company has a strong financial position, indicated by its revenue growth. Starbucks has witnessed a steady growth in its revenues over many years. The company's revenues increased at a compound annual growth rate (CAGR) of 11% from $9,774.6 million in FY2009 to $14,892.2 million in FY2013. The revenues of the company grew by 12% in FY2013 over the previous year. The revenue growth was mainly attributable to increased revenues from company-operated stores (contributing $1.3 billion), driven by a 7% increase in comparable store sales. It was also due to incremental revenues from net new company-operated store openings and licensed stores. The company's operating results included a litigation charge as a result of the conclusion of its arbitration with Kraft Foods Group which resulted in a pretax charge to operating expenses of $2.8 billion. Excluding this charge, the company's operating profit increased 23.1% in FY2013 over FY2012. In addition to the revenues of the company, the other financial parameters have been impressive. Cash flow from operations was $2.9 billion in FY2013 compared to $1.8 billion in FY2012. Total cash and cash equivalents increased by more than 100% to $2,575.7 million in FY2013. Thus, strong financial performance will provide the company with financial flexibility and also help in expansion activities. Weaknesses Starbucks Corporation MarketLine Page 29 Starbucks Corporation SWOT Analysis Product recalls Starbucks has been registering increasing instances of product recalls lately. In February 2014, Evolution Fresh initiated a voluntary product recall of approximately 1,700 bottles of organic sweet greens and ginger juice sold by grocery retailers in California and Nevada as a small number of these products were swollen. La Boulange Cafe & Bakery voluntarily initiated a product recall of 75 Soft Caramel Jams in 8.4 oz. jars as a precautionary measure in November 2013. This product was sold exclusively in 20 La Boulange Cafe & Bakery stores in the San Francisco Bay area. The recall was initiated after it was discovered by the company that the product was inadvertently mislabeled and filled with Hazelnut Jam (containing undeclared hazelnut). In February 2013, the company recalled all its products containing wheat grass sourced from Sprouters Northwest, due to the possible contamination with Listeria monocytogenes. The recall included all varieties of wheatgrass products sold across the company's Seattle's Evolution Fresh retail stores, including handcrafted beverages containing wheatgrass. In 2012, the Canadian Food Inspection Agency issued a warning against consuming Justin's-brand honey peanut butter, used in Starbucks' protein bistro boxes. Starbucks voluntarily recalled the protein bistro boxes, which were feared to contain salmonella, potentially fatal bacteria. In the same year, Starbucks Seasonal HarvestFruit Blend, another product of the company, was recalled due to concerns over possible salmonella braenderup contamination. Earlier, in 2011, the US Department of Agriculture's Food Safety and Inspection Service reported finding Listeria bacteria in samples taken from chicken to be used in one of Starbucks' bistro box line of ready-to-eat meals. Following the report, FSIS and Flying Food Group, suppliers to Starbucks, recalled all Starbucks Chipotle Chicken Wraps and Starbucks Chicken and Hummus boxed meals produced during that time. Later, FSIS and Flying Food expanded the recall to include two more contaminated products Starbucks Salami and Cheese and Starbucks Chicken Lettuce Wraps. Product recalls could affect the value of the Starbucks brand and result in a decline in demand for its products. Tax evasion and lawsuits Starbucks is involved in several lawsuits. In 2012, Starbucks was alleged to have diverted its profits earned in the UK to other European nations and avoided taxes for the last three years. According to reports, the company paid only 8.6 million (approximately $13.5 million) in corporation tax since launching in the UK in 1998, despite recording cumulative sales of 3 billion (approximately $4.7 billion) during this period. A network of UK-based protest groups established to protest against tax avoidance in the UK targeted the company's coffeehouses in the UK. In December 2012, it staged protests across more than 40 Starbucks shops, which disrupted business at these locations. In January 2013, Starbucks committed to pay about 20 million (approximately $31.4 million) in British corporation tax over the next two years. In the first quarter of FY2011, Starbucks notified Kraft Foods Global (now known as Kraft Foods Group, Inc.) the discontinuation of its distribution arrangement due to material breaches by Kraft Fo