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... ks sells coffee drinks and beans, pastries, and other food items and beverages, as well as mugs, coffeemakers, coffee grinders, and storage containers. The company also sells its beans to restaurants, businesses, airlines, and hotels, and it offers mail-order and online catalogs. Starbucks has expanded into coffee ice cream (with Dreyer's) and makes Frappuccino, a bottled coffee drink (with PepsiCo).
Starbucks Corporation NASD: SBUX Sector: Consumer/Non-Cyclical Industry: Food Processing STARBUCKS BUSINESS SUMMARY Starbucks Corporation purchases and roasts high quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of pastries and confections, coffee-related accessories and equipment, and a line of premium teas, primarily through its Company-operated retail stores. In addition to sales through its Company-operated retail stores, Starbucks sells coffee and tea products through other channels of distribution (specialty operations). Starbucks, through its joint venture partnerships, also produces and sells bottled Frappuccino coffee drink and a line of premium ice creams. The Company's objective is to establish Starbucks as the most recognized and respected brand in the world.
Company-Operated Retail Stores As of the fiscal year ended October 1, 2000, Starbucks had 2, 619 Company-operated stores in 34 states, the District of Columbia and five Canadian provinces (which comprise the Company-operated North American retail operations), as well as the United Kingdom, Thailand and Australia (which comprise the Company-operated international retail operations). Company-operated retail stores accounted for approximately 84 % of net revenues during fiscal 2000. All Starbucks stores offer a choice of regular and decaffeinated coffee beverages, including at least one "coffee of the day, " a broad selection of Italian-style espresso beverages, cold blended beverages, a selection of teas and distinctively packaged, roasted whole bean coffees. Starbucks stores also offer a selection of fresh pastries and other food items, sodas, juices, and coffee-making equipment and accessories. Each Starbucks store varies its product mix depending upon the size of the store and its location. Larger stores carry a broad selection of the Company's whole bean coffees in various sizes and types of packaging, as well as an assortment of coffee and espresso-making equipment and accessories such as coffee grinders, coffee makers, espresso machines, coffee filters, storage containers, travel tumblers and mugs.
Smaller Starbucks stores and kiosks typically sell a full line of coffee beverages, a more limited selection of whole bean coffees and a few accessories such as travel tumblers and logo mugs. Approximately 15 % of Starbucks stores carry a selection of "grab and go" sandwiches and salads. During fiscal 2000, the Company's retail sales mix by product type was approximately 73 % handcrafted beverages, 14 % food items, 8 % whole bean coffees, and 5 % coffee-making equipment and accessories. Specialty Operations Starbucks specialty operations strive to develop the Starbucks brand outside the Company-operated retail store environment through a number of channels. Starbucks specialty operations include retail store licensing agreements, wholesale accounts, grocery channel licensing agreements and joint ventures. Starbucks specialty operations also include direct-to-consumer marketing channels.
In certain licensing situations, the licensee is a joint venture in which Starbucks has an equity ownership interest. During fiscal 2000, specialty revenues (which include royalties and fees from licensees as well as product sales) accounted for approximately 16 % of the Company's net revenues. Although the Company does not generally relinquish operational control of its retail stores in North America, in situations in which a master concessionaire or another company controls or can provide improved access to desirable retail space, the Company may consider licensing its operations. As part of these arrangements, Starbucks receives license fees and royalties and sells coffee and related products for resale in the licensed locations. Employees working in the licensed locations must follow Starbucks detailed store-operating procedures and attend training classes similar to those given to Starbucks store managers and employees.
As of October 1, 2000, the Company had 530 licensed stores in continental North America. Starbucks retail stores located outside of North America, the United Kingdom, Thailand and Australia are operated through a number of joint venture and licensing arrangements with prominent retailers. During fiscal 2000, the Company expanded its international presence by opening 184 new international licensed stores, including the first stores in Lebanon, the United Arab Emirates, Qatar, Hong Kong and Shanghai. At fiscal year end, the Company had 154 stores in Japan, 47 in Taiwan, 28 in China, 28 in Singapore, 27 in the Philippines, 20 in Hawaii, 15 in New Zealand, 14 in Malaysia, six in South Korea, five in the United Arab Emirates, four in Kuwait, three in Lebanon, and one in Qatar. Starbucks also sells whole bean and ground coffees to several types of wholesale accounts, including office coffee distributors and institutional foodservice management companies that service business, industry, education and healthcare accounts, and hotels, airlines and restaurants. In fiscal 1998, Starbucks entered into a long-term licensing agreement with Kraft Foods, Inc.
to accelerate the growth of the Starbucks brand into the grocery channel in the United States. Pursuant to such agreement, Kraft manages all distribution, marketing, advertising and promotions for Starbucks whole bean and ground coffee in grocery, warehouse club and mass merchandise stores. By the end of fiscal 2000, the Company's whole bean and ground coffees were available throughout the United States in approximately 16, 000 supermarkets. The Company has two non-retail domestic 50 - 50 joint ventures. The North American Coffee Partnership, a joint venture with the Pepsi-Cola Company, a division of PepsiCo, Inc. , was formed in fiscal 1994 to develop and distribute ready-to-drink coffee-based products. By the end of fiscal 2000, the joint venture was distributing bottled Frappuccino coffee drink to approximately 250, 000 supermarkets, convenience and drug stores and other locations throughout the United States and Canada.
The Company formed a joint venture with Dreyer's Grand Ice Cream, Inc. in fiscal 1996 to develop and distribute Starbucks premium coffee ice creams. By the end of fiscal 2000, the joint venture was distributing a variety of ice cream and novelty products to over 21, 000 supermarkets throughout the United States. The Company makes fresh Starbucks coffee and coffee-related products conveniently available via mail order and on-line. Starbucks publishes and distributes a mail order catalog that offers its coffees, certain food items and select coffee-making equipment and accessories, and the Company maintains a web site at www. starbucks.
com with an on-line store that allows customers to browse for and purchase coffee, gifts and other items via the Internet. The Company believes that its direct-to-consumer operations support its retail store expansion into new markets and reinforce brand recognition in existing markets. INDUSTRY FINANCIAL SUMMARY SBUX purchases, roasts and sells high quality whole bean coffees, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages and a variety of pastries. For the 26 weeks ended 4 / 1 / 01, net sales rose 25 % to $ 1. 30 billion. Net income rose 40 % to $ 81. 2 million. Revenues reflect the opening of new retail stores and higher comparable store sales.
Net income also reflects a higher gross margin due to an increase in sales prices.
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