i
Memo
To: Howard Schultz, Chairman and Chief Executive Officer, Starbucks Corp.
From: Ishita Khosla, Consultant
Date: October 2, 2015
Subject: Recommendation to expand international markets, menu, tea products
Background
Starbucks Corporation is an American company founded in Seattle, WA in 1971. They are
a premier roaster, marketer and retailer of specialty coffee around the world. Their product
mix includes a selection of high quality and premium coffee, teas, fine pastries, ground
coffee, drink ware, coffee equipment, and seasonal drinks. They have more than 22000
operated and licensed retail stores in 67 different countries with approximately 191,000
employees. Their brands include Teavana, Evolution Fresh, La Boulange, Seattle’s best
coffee and Tazo Tea. They have revenue of 18 billion dollars and the largest market share
of 36% of the coffee industry.
Critical Issues
The major issue facing Starbucks is the closure of many stores around the world. Starbucks
has closed 900 shops and fired 12000 employees drastically to cut costs and put the
company back on course. They are also closing down all 23 of their La Boulange bakery
cafes in the next three months just three years after purchasing it for $100 million as it
wasn’t sustainable for the company’s long term growth.
Starbuck’s quick ratio has also decreased from 1.17 in 2011 to 0.81 in 2014. The quick
ratio measures the dollar amount of liquid assets available for each dollar of current
liability. A decreasing quick ratio means a declining liquidity position for the company.
The sugar content of the new Frappuccino favors introduced for their 20th anniversary
contains up to 20 teaspoons of sugar which is more than double the recommended daily
allowance of sugar for adults.
Recommendations
Starbucks biggest growth is in its international expansion. The emerging markets including
China, Brazil, India, South Africa and Mexico offer significant opportunities for the coffee
industry to increase the number of stores and customer base. There is a growing middle
class population with a significant demand for coffee.
Starbucks should also expand their product line VIA to capture price sensitive customers
in hard economic times while allowing moving into an untapped market for high quality
instant coffee. While promoting the VIA, Starbucks should also concentrate on marketing
the Teavana, Tazo and Evolution Fresh for customers who look for more alternatives to
coffee.
Closing
These recommendations are based on the attached internal and external analysis of
Starbucks. Thank you for your time and consideration. I look forward to discussing the
findings of this report with you on Monday, October 5, 2015 at noon.
Attachment

ii
Executive Summary
The following report is comprised of an in-depth internal and external analysis of Starbuck’s current
position in the coffee industry and provides strategic recommendations for Starbucks to its increase
market share and capitalize on current marketing and consumer trends. The internal analysis consists
of a SWOT analysis and a VRIO framework; the external analysis includes Michael E. Porter’s 6
forces analysis, a competitor analysis and concludes with three strategic recommendations. The
SWOT and Porter’s 6 forces analysis use high, medium and low indicators to signify the level of
strength of the resource mentioned. The information in the report has been collected from Mintel,
Mergent, IBIS World and several other sources.
The SWOT analysis demonstrates Starbuck’s core strengths and weakness as well as
opportunities and threats. The VRIO framework emphasizes on the company’s resources that add or
detract value from the firm’s performance. Porter’s 6 forces analysis describes the coffee industry in
terms of its potential new entrants, supplier power, buyer power, rivalries, compliments and
substitutes. The competitor analysis shows Starbuck’s performance in relation to its competitors in the
beverage, fast food and casual restaurants industry. Among resources used, Mintel is good for market
research reports that covers target markets and demographics while IBIS World is useful for industry
analysis and statistic and Mergent helps provide income statements, balance sheets and cash flow data.
The report leads to three strategic recommendations for Starbucks. Starbucks should expand
into international markets since the U.S. market is saturated. Starbucks should expand its line of
healthy and organic products to target the health conscious consumers, who look for healthy
alternatives. Starbucks should expand Tea and juice in its product mix. To conclude, Starbucks should
exploit its core strengths and continue innovating to keep up with the changing consumer trends and
preferences.

iii
Table of Contents
Executive Summary………………………………………………………………………..…i
Table of Contents……………………………………………………………………….……ii
Internal Analysis
SWOT Analysis………………………………………………………..………………….1
VRIO Framework………..…………………………………………………………..……4
External Analysis
Porter’s Six Forces Analysis….………………………………………...………...……….7
Competitor Map……………......………………………………………………………….9
Strategic Recommendations…………………………………………………………...……11
Bibliography...………..………………………………………………………...……..…….14
Exhibits
Key Executive Bios………………….……………………………………………………19
Financial Statements………………………………………………..……………………21

1
SWOT Analysis
Strengths Weaknesses
Brand Image
 Highly valued partners creating unique Starbucks experience.1 M
 Passion,knowledge, unsurpassed expertise and enthusiasm, to
create a truly outstanding coffee experience for customers.2 H
 Selection of premium teas,fine pastries, ground coffee, drink ware,
coffee equipment, and seasonaldrinks.3 H
 “Most Admired Companies in America” Fortune 2003–2015.4 L
Brand Strategy
 More than 22,000 retail stores in 67 countries.5 H
 Newsletter: Subscribe to save 10% on next order.6 L
 My Starbucks Rewards: free drink and food rewards with Stars.7H
Financials
 Company Valued at 85.19B as of September 17 2015.8 H
 Industry-relevant revenue comprises about 11.6% of the company's
total revenue.9 M
 Ratios of assets increased from 18.17 in 2011-18.62 in 2014.10
 The debt equity ratio for the industry of coffee bean is 1.39 but for
the company is 0.40, which means much less debt.11 M
 100% Rating on the Corporate Equality Index Human Rights
Campaign Foundation – 2015.12 L
International Expansion
 First international store in Tokyo, joint venture with Japanese
retailer and restaurant openerSazabu.13 H
 The third largest coffee importer in the word.14 H
 Within 6 years, 368 Japanese stores.15 H
Social and Environmental
 Starbucks College Achievement Plan 16 M
 Donating millions of dollars to charities 17 M
 "Fair trade" exports with Third World coffee bean producer. 18 M
Competitors
 Starbuck’s stock price increased by 162.383% while McDonald’s
stockprice increased by 23.24%19 and Dunkin’ brand stock price
increased by 95.372% from 2012 to 2015. H
Financials
 The quick ratio decreased from 1.17 in 2011 to 0.81 in 2014.20
 The P/E of Starbucks 32.26 and McDonalds is 22.96 that means
McDonalds has an advantage.21 M
 Quick ratio for the industry is 1.08, and Starbucks company
quick ratio 0.70 which is much less than the industry.22 M
Prices
 A grande (medium 16 oz.) coffee at Starbucks costs $2.10,
compared to a medium coffee at Dunkin’ Donuts (14 o.z), which
costs $2.05, or a medium coffee at McDonalds (16 oz.), which
costs $1.49.23 M
Australia Market
 Starbucks could not get big success in Australia.24 H
 Almost 14,000 cafe and restaurants serving a variety of coffee
types in Australia with leads to high competition.25 H
Closing La Boulange
 All 23 of its bakery-cafes closing in the three months.26 H
 Just three years after purchasing the pastry company for $100
million.27 H
 Weren’t sustainable for the company's long-term growth.28 H
Store Closing
 Closed 900 shops,mostly in the United States to drastically cut
costs and put the company back on course.29 M
 Fired 12,000 employees.30 M
Sugar Content
 Unveiled six new Frappuccino flavors for 20th anniversary.31 L
 Cinnamon Roll-102g of sugar(20 teaspoons),Caramel Cocoa
Cluster with 97.3g (19 teaspoons),Red Velvet Cake Crème, with
87g (17 teaspoons)ofsugar.32 L
 More than double the recommended daily allowance of sugarfor
adults.33 L
Opportunities Threats
Expansion of Asian Markets
 The most potential for long-term growth, is China.34 IS
 An appreciation for the distinctive political, economic,
sociocultural, and market forces shaping the country.35 IS
 One competitive domestic coffee producer in China, Li Shen. 36 IS
 High market potential as young generation of wealthy coffee. 37 IS
Promoting product line
 Aggressively promote its soluble coffee product VIA.38 CS
 Large opportunity capturing price sensitive customers in hard
economic times while allowing moving in an untapped market for
high quality instant coffee.39 CS
Emphasis on Rewards Card
 Advertise free rewards program for customers to save money.40CS
Targeting the middle class
 Caters to affluent, well educated,of ages 25 and 44 while new
customers are youngerand in a lower income bracket.41 CS
 Customer to reduce their coffee during economic hardships.42 IS
Deconstructing the trend
 Single-pod coffee machines offer a bettervalue. 43 IS
 Alternative, portable, and on-the-go caffeinated products.44 IS
 Flavored syrups to allow a new level of flavor customization.45 IS
Penny Stafford Lawsuit
 Illegal monopoly by barring other coffeehouses.46 CS
 A predatory monopoly crushing her and small coffee sellers.47CS
 "Starbucks has left a lot of bodies in their wake," Deaf Dog
Coffee.48 CS
Negligence
 5-year-old’s parents sued due to presence of camera in
restroom.49 CS
 Obesity charges against the beverage Industry. 50 IS
China Controversy
 Allegations of cultural insensitivity and bullying tactics. 51 CS
 Café within Beijing’s World Heritage Forbidden City.52 CS
 7 years later, removal from the Forbidden City celebrations for
Chinese Authorities.132 million Internet users; online threat is
greater than that of the fair-trade movement.53 CS
Sustainability
 Coffee oversupply resulted from decline in industry regulation.54
IS
 Certification schemes that allow farmers to get less than the Fair
Trade price or some use of chemical fertilizers and pesticides
watering down sustainability standards.55 IS
LEVELS; H= High, M= Medium, L=Low Specificity; IS= Industry Specific CS= Company specific

2
SWOT References
1 "Exporting a North American Concept to Asia: Starbucks in China." Sage Journals. May 1, 2005.
http://cqx.sagepub.com/content/46/2/275.full.pdf html.
2 Ibid.
3 "Company Information." Starbucks Coffee Company. http://www.starbucks.com/about-us/company-
information.
4 "Starbucks Company Recognition." Starbucks Coffee Company. http://www.starbucks.com/about-
us/company-information/starbucks-company-recognition.
5 "Company Information." Starbucks Coffee Company. http://www.starbucks.com/about-us/company-
information.
6 "About Us." Starbucks Store. http://store.starbucks.com/about-us/about-us.html.
7 "My Starbucks Rewards™." Starbucks Coffee Company. https://www.starbucks.com/card/rewards.
8 "Starbucks Enterprise Value:." Starbucks Enterprise Value (SBUX).
https://ycharts.com/companies/SBUX/enterprise_value.
9 "Starbucks Corporation." IBISWORLD.
http://clients1.ibisworld.com.lib.pepperdine.edu/reports/us/industry/majorcompanies.aspx?entid=272.
10 "Starbucks Company Financials." Mergent Online.
http://www.mergentonline.com.lib.pepperdine.edu/companyfinancials.php?pagetype=ratios&compnumber=732
71.
11 "Starbucks Corp." SBUX Analysis- MSN Money. http://www.msn.com/en-
us/money/stockdetails/analysis/fi-126.1.SBUX.NAS.
12 "Starbucks Company Recognition." Starbucks Coffee Company. http://www.starbucks.com/about-
us/company-information/starbucks-company-recognition.
13 "Exporting a North American Concept to Asia: Starbucks in China." Sage Journals. May 1, 2005.
http://cqx.sagepub.com/content/46/2/275.full.pdf html.
14 Ibid.
15 ibid.
16 "Starbucks® Store Coffee, Tea, Products and Gifts." Starbucks® Store. http://store.starbucks.com.
17 Iwata, Edward. "Owner of small coffee shop takes on java titan Starbucks." USA Today (2006).
(https://scholar.google.com/scholar?hl=en&as_sdt=0,5&q=starbucks+lawsuits)
18 ibid.
19 "Starbucks Company Financials." Mergent Online. (Self Calculations)
20 "Starbucks Company Financials." Mergent Online.
http://www.mergentonline.com.lib.pepperdine.edu/companyfinancials.php?pagetype=ratios&compnumber=732
71.
21 "SBUX Competitors | Starbucks Corporation Stock - Yahoo! Finance." SBUX Competitors | Starbucks
Corporation Stock - Yahoo! Finance. https://finance.yahoo.com/q/co?s=SBUX Competitors.
22 "Starbucks Company Financials." Mergent Online.
http://www.mergentonline.com.lib.pepperdine.edu/companyfinancials.php?pagetype=ratios&compnumber=732
71.
23 White, Marian. "How Much Are You Really Paying for Your Caffeine Buzz?" BostInno. October 8, 2014.
http://bostinno.streetwise.co/2014/10/08/starbucks-dunkin-donuts-and-mcdonalds-which-coffee-has-the-most-
caffeine/.
24 "How the Local Competition Defeated a Global Brand:The Case of Starbucks." Hayato0435. June 5, 2013.
https://hayato0435.wordpress.com/2013/06/06/how-the-local-competition-defeated-a-global-brandthe-case-of-
starbucks/.
25 Ibid.
26 M, Laura. "Starbucks to Close All 23 La Boulange Locations." USA Today. June 17, 2015.
http://www.usatoday.com/story/money/2015/06/17/starbucks-la-boulange/28851063/. 0

3
27 Peterson, Heyley. "Why Starbucks Might Have Planned to Close down Its $100 Million Bakery Chain All
along." Business Insider. June 22, 2015. http://www.businessinsider.com/why-starbucks-closed-la-boulange-
bakeries-2015-6http://www.businessinsider.com/why-starbucks-closed-la-boulange-bakeries-2015-6.
28 M, Laura. "Starbucks to Close All 23 La Boulange Locations." USA Today. June 17, 2015.
http://www.usatoday.com/story/money/2015/06/17/starbucks-la-boulange/28851063/. 0
29 Miller, Claire. "A Changed Starbucks. A Changed C.E.O." The New York Times. March 12, 2011.
http://www.nytimes.com/2011/03/13/business/13coffee.html?pagewanted=all&_r=0.
30 Peterson, Kim. "Starbucks' Growth Strategy? Open More Starbucks." CBSNews. April 28, 2014.
http://www.cbsnews.com/news/starbucks-growth-strategy-open-more-starbucks/.
31 RICHARDS, VICTORIA. "Starbucks' New Frappuccinos Contain 'as Much Sugar as a Litre of Coke." The
Independent. June 10, 2015. http://www.independent.co.uk/life-style/food-and-drink/news/starbucks-new-
frappuccinos-contain-as-much-sugar-as-a-litre-of-coke-10310044.html.
32 Ibid.
33 Ibid.
34 "Exporting a North American Concept to Asia: Starbucks in China." Sage Journals. May 1, 2005.
http://cqx.sagepub.com/content/46/2/275.full.pdf html.
35 Ibid.
36 ibid.
37 ibid.
38 Crowe, Remle. "Avoiding the Caffine Crash: A Strategic Analysis and Recommendations for Starbucks."
(2011).(http://auislandora.wrlc.org/islandora/object/0910capstones%3A185)
39 ibid.
40 ibid.
41 ibid.
42 ibid.
43 Savara, Tanvi. "Consumer and Innovation Trends and Future Growth Opportunities in Coffee." ICO Coffee
Seminar 2014. March 1, 2014. http://www.ico.org/documents/cy2013-14/presentations/seminar march 2014
presentations/seminar-march2014-tanvi-savara-e.pdf.
44 ibid.
45 ibid.
46 Iwata, Edward. "Owner of small coffee shop takes on java titan Starbucks." USA Today (2006).
(https://scholar.google.com/scholar?hl=en&as_sdt=0,5&q=starbucks+lawsuits)
47 ibid.
48 ibid.
49 ibid.
50 Koplan, Jeffrey P., and Kelly D. Brownell. "Response of the food and beverage industry to the obesity
threat." Jama 304, no. 13 (2010): 1487-1488.
(https://scholar.google.com/scholar?q=opportunities+for+the+beverage+industry+2015&btnG=&hl=en&as_sdt
=0%2C5)
51 Dinnen, Mark. "Starbucks and the Fair Trade Movement."
(https://scholar.google.com/scholar?q=threats+facing++starbucks&btnG=&hl=en&as_sdt=0%2C5)
52 ibid.
53 ibid.
54 Linton, April. "Partnering for sustainability: business–NGO alliances in the coffee industry." Development
in Practice 15, no. 3-4 (2005): 600-
614.(http://scholar.google.com/scholar?q=weather+affecting+the+coffee+industry&btnG=&hl=en&as_sdt=0%
2C5)
55 Ibid.

4
VRIO Framework
Resources Valuable? Rare? Costly
to
Imitate?
Exploite
d by
organizat
ion?
Competitive
Implications
Customer Service Strength YES YES NO YES Temporary
Competitive
Advantage
Passion,knowledge, unsurpassed expertise and enthusiasm, to create a
truly outstanding coffee experience for customers.1
Number of Stores Strength YES YES YES YES Sustained
Competitive
Advantage
More than 22,000 retail stores in 67 countries2
13,000 in the North America and 255 in New York City.3
High Quality Strength YES YES YES YES Sustained
Competitive
Advantage
-Serves a high-quality brew that helps get power through the day. 4
-Standardization of quality over speed.5
Variety of Products Strength YES YES NO YES Temporary
Competitive
Advantage
-Selection of premium teas, fine pastries,ground coffee; drink ware,
coffee equipment, and seasonaldrinks6
-Option to overindulge (a trenta macchiato with a donut on the side) or
under-indulge (a skinny latte with a veggie snack box).7
My Starbucks Rewards Card (Customer Loyalty) Strength YES YES NO YES Temporary
Competitive
Advantage
Free drink/food rewards, early access to new products,custom offers
and easy payment with the mobile app.8
Howard Schultz Strength YES YES NO YES Temporary
Competitive
Advantage
Dramatically reversed the company's slide, Starbucks market cap has
nearly quadrupled since his entry.9
Specialty Coffee Strength YES NO NO YES Realized
Competitive
Parity
Secret menu- Vanilla Pumpkin Nut Latte, Apple Berry Juice Freeze,
Strawberry Limeade, Arnold Palmer.10
Global Presence Strength YES YES YES YES Sustained
Competitive
Advantage
Starbucks 49th among the Top 100 global retailers,
>3,000 stores in China11, 368 Japanese stores12
Company Culture Strength YES YES YES YES Sustained
Competitive
Advantage
Highly valued partners creating unique Starbucks experience13
Social Responsibility Strength YES YES NO YES Temporary
Competitive
Advantage
Donating millions of dollars to charities14
Donate thousands ofseedlings from five different coffee tree hybrids
developed through its research to ICAFE.15
Strategic locations Strength YES YES NO YES Temporary
Competitive
Advantage
New Concept: An “Espresso Shot” of an experience.16
Have a store on every corner competing with each other.17
Brand recognition Strength YES YES YES YES Sustained
Competitive
Advantage
Awards for 100-top Most Powerful Brands, The Reputations of the
Most Visible Companies, World's Most Admired Companies, The
World's Most Valuable Brands.18
Aesthetic appeal and Wi-Fi Access Strength YES NO NO YES Competitive
Parity-Mr. Schultz said one of the most valuable assets was the wireless
Web.19
- Great music, great service, cool factor, concept of the store is the
“third place” after home and work. 20
Closing La Boulange Weakness NO - - NO Competitive
disadvantage23 of all its La Boulange bakery-cafes closing in the three months.21
High sugarcontent Weakness NO - - NO Competitive
Disadvantage> Double the recommended daily allowance of sugarfor adults22
Store closings Weakness NO - - NO Competitive
DisadvantageClosed 900 shops,mostly in the United States to drastically cut costs
and put the company back on course.23
Price of Coffee Weakness NO - - NO Competitive
DisadvantageStarbucks- $2.10, Dunkin’- $2.05, McDonalds - $1.49.24

5
VRIO Reference
1 "Exporting a North American Concept to Asia: Starbucks in China." Sage Journals. May 1, 2005.
http://cqx.sagepub.com/content/46/2/275.full.pdf html.
2 "Company Information." Starbucks Coffee Company. http://www.starbucks.com/about-us/company-
information.
3 "Starbucks: Global Coffee Giant Has New Growth Plans." Forbes. January 31, 2013.
http://www.forbes.com/sites/walterloeb/2013/01/31/starbucks-global-coffee-giant-has-new-growth-plans/.
4 "3 Reasons Why Starbucks Still Shines, Despite Market Shortcomings." Forbes. August 6, 2012.
http://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-why-starbucks-still-shines-despite-
market-shortcomings/.
5 "3 Reasons Why Starbucks Still Shines, Despite Market Shortcomings." Forbes. August 6, 2012.
http://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-why-starbucks-still-shines-despite-
market-shortcomings/.
6 "Company Information." Starbucks Coffee Company. http://www.starbucks.com/about-us/company-
information.
7 "3 Reasons Why Starbucks Still Shines, Despite Market Shortcomings." Forbes. August 6, 2012.
http://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-why-starbucks-still-shines-despite-
market-shortcomings/.
8 "My Starbucks Rewards™." Starbucks Coffee Company. https://www.starbucks.com/card/rewards.
9 "#737 Howard Schultz." Forbes. September 23, 2015. http://www.forbes.com/profile/howard-schultz/.
10 "Starbucks Secret Menu." Secret Drinks. 2015. Accessed September 24, 2015.
http://starbuckssecretmenu.net/category/secret-drinks/.
11 "Starbucks: Global Coffee Giant Has New Growth Plans." Forbes. January 31, 2013.
http://www.forbes.com/sites/walterloeb/2013/01/31/starbucks-global-coffee-giant-has-new-growth-plans/.
12 "Exporting a North American Concept to Asia: Starbucks in China." Sage Journals. May 1, 2005.
http://cqx.sagepub.com/content/46/2/275.full.pdf html.
13 "Exporting a North American Concept to Asia: Starbucks in China." Sage Journals. May 1, 2005.
http://cqx.sagepub.com/content/46/2/275.full.pdf html.
14 Iwata, Edward. "Owner of small coffee shop takes on java titan Starbucks." USA Today (2006).
(https://scholar.google.com/scholar?hl=en&as_sdt=0,5&q=starbucks+lawsuits
15 "Starbucks Strengthens Global Specialty Coffee Supply: Openly Shares More Than a Decade of Research,
Verifies 99% of Coffee Ethically Sourced." Starbucks Strengthens Global Specialty Coffee Supply: Openly
Shares More Than a Decade of Research, Verifies 99% of Coffee Ethically Sourced. April 9, 2015.
http://www.businesswire.com/news/home/20150409005213/en/Starbucks-Strengthens-Global-Specialty-
Coffee-Supply-Openly#.VgM4O2RViko.
16 "New Starbucks Concept Store: An." Starbucks Newsroom. April 30, 2015.
https://news.starbucks.com/news/NY-express-format-store.
17 "Starbucks' Store Location Approach Examined." 10News. April 5, 2012.
http://www.10news.com/news/starbucks-store-location-approach-examined.
18 "Starbucks." Brand Ranking. http://www.rankingthebrands.com/Brand-detail.aspx?brandID=103.
19 Dominus, Susan. "The Starbucks Aesthetic." The New York Times. October 21, 2006.
http://www.nytimes.com/2006/10/22/arts/22domi.html?pagewanted=all&_r=0.
20 Ibid.
21 M, Laura. "Starbucks to Close All 23 La Boulange Locations." USA Today. June 17, 2015.
http://www.usatoday.com/story/money/2015/06/17/starbucks-la-boulange/28851063/. 0
22 RICHARDS, VICTORIA. "Starbucks' New Frappuccinos Contain 'as Much Sugar as a Litre of Coke." The
Independent. June 10, 2015. http://www.independent.co.uk/life-style/food-and-drink/news/starbucks-new-
frappuccinos-contain-as-much-sugar-as-a-litre-of-coke-10310044.html.

6
23 Miller, Claire. "A Changed Starbucks. A Changed C.E.O." The New York Times. March 12, 2011.
http://www.nytimes.com/2011/03/13/business/13coffee.html?pagewanted=all&_r=0.
24 White, Marian. "How Much Are You Really Paying for Your Caffeine Buzz?" BostInno. October 8, 2014.
http://bostinno.streetwise.co/2014/10/08/starbucks-dunkin-donuts-and-mcdonalds-which-coffee-has-the-
most-caffeine/.

7
Porter’s Six Forces Analysis for Coffee Industry
6 Forces Analysis
Threats of New Entrants
Supply side economics of scale H
 Incumbents have access to global coffee beans,which
are high-quality Arabica beans.1
 Coffee retailers have supply-side contracts with coffee
manufacturers. 2
 Incumbents produce at a decreasing long-run average
cost,which means that they produce close to their
minimum efficient scale (MES)3
Demand side economic benefits of scale L
 Incumbents give extra premiums and benefits on their
rewards cards due to a high frequency of users.4
 Although Starbucks has the largest market share of
36.0%, these big companies only account for 37.0% of
industry revenue. 5
 As it is monopolistic competition structure, not one
company can constitute the whole industry revenue. It
is highly competitive but each has a small degree
of market control.6
Customer switching costs L
 Big brands like Starbucks have a store on every corner
within 1.5 miles.7
M-H
Capital requirement L
 Purchases,wages, rent and utilities are high for coffee
as to locate in high foot traffic areas. 8
 Facilities, equipment, furniture and fittings can be
leased.9
 Even though coffee retailers like Starbucks have a
strong market presence,industry entrants can still cater
to local customers on the basis on convenience. 10
Incumbency advantages H
 Established companies have advantages ofbrand
recognition, brand loyalty, good quality, access to its
resources and prime locations. 11
 For new entrants,the cost of purchasing coffee beans is
high. 12
 Important players such as Starbucks have lower
purchase costs due to acquiring contracts with coffee
manufacturers. 13
Government policy M
 Minimum-wage regulations, employee benefits and
conditions,workers insurance and payment of health
insurance coverage, The US Food and Drug
Administration’s (FDA) Model Food Code, The FDA’s
Nutritional Value, Sales tax or use or consumption tax also
applies.14
Power of Supplier M-L Power of Buyers L Rivalry H
High switching costs M
 Drought and disease in major coffee
producing countries such as Brazil,
Colombia, and Central America.15
More demand than supplies M
 Tight supplies, as well as a growing
international demand for coffee. 16
No forward integration L
 Big companies purchases from
suppliers directly, no opportunity for
forward vertical integration.17
Many Suppliers L
 25 million farmers and coffee workers
in over 50 countries producing coffee 18
Many Buyers L
 In the U.S. alone, over 130
Million consumers are coffee
drinkers, no single buyer can
demand price concession19
Low Volume M
 Coffee drinkers in the U.S.,
purchases of3.1 cups per day.20
Differentiated Products L
 Products including espresso,
cappuccino,Americano, latte.21
Numerous competitors with power H
 70% of industry revenues come from the
top 50 coffee shops out of20,000 coffee
shops.22
High market share M
 Dunkin has 23% and Starbucks has 36%
market share.23
Low industry growth H
 The coffee industry growth is slow as it fell
for the fifth consecutive month in March
2015 by 2.7%. 24
Substitutes H Complements H
Many substitutes available H
 Energy drinks, Alcohol, Soda, Juices, Tea.25
 Tea is the second most widely consumed beverage
worldwide, following only water. 26
 Over one half of the American population and four in
five consumers drink tea. 27
Do it themselves M
 People who said they had drunk coffee the previous
day, 83 percent said they had made it at home to save
money.28
Many direct compliments H
 Customers yearn for a cup of java with desserts like mocha cake,
espresso ice cream, cheesecake,muffins, biscotti, scones,
croissants,mousse or truffles.29
Many indirect compliments H
 Office building as sixty-five percent of workers drink coffee on
the job, an average of three cups a day.30
 School and college students have a strong urge and need for the
caffeine. 31
 Neighborhoods’,Shopping malls, Hotels.32

8
Porter’s Six Forces Analysis References
1 "The Retail Market for Coffee in the US." IBISWORLD.
http://clients1.ibisworld.com.lib.pepperdine.edu/reports/us/industry/default.aspx?entid=6098.
2 Ibid.
3 Johansson,Hanna,and Ylva Bruzelius. "Entry into the Coffee Shop Market." January 25, 2012.
https://gupea.ub.gu.se/bitstream/2077/28685/1/gupea_2077_28685_1.pdf.
4 "My Starbucks Rewards." My Starbucks Rewards. https://card.starbucks.at/.
5 "The Retail Market for Coffee in the US." IBISWORLD.
6 "Monopolistic Competition." Monopolistic Competition. http://cassmba3.weebly.com/.
7 "Starbucks' Store Location Approach Examined." 10News. April 5, 2012. http://www.10news.com/news/starbucks -store-
location-approach-examined.
8 "The Retail Market for Coffee in the US." IBISWORLD.
http://clients1.ibisworld.com.lib.pepperdine.edu/reports/us/industry/default.aspx?entid=6098.
9 Ibid.
10 Ibid.
11 Ibid.
12 Ibid.
13 Ibid.
14 Ibid.
15 Rudarakanchana, Nat. "Coffee Beans: A Market To Watch In 2014." Ibtimes. October 23, 2013.
http://www.ibtimes.com/coffee-beans-market-watch-2014-1436836.
16 "LSR: COFFEE HOUSES AND DONUT SHOPS." Mintel Reports.
http://academic.mintel.com.lib.pepperdine.edu/display/679896/.
17 "Coffee Purchasing." Starbucks Coffee Company. http://www.starbucks.com/responsibility/global-report/ethical-
sourcing/coffee-purchasing.
18 "Coffee FAQ | Global Exchange." Coffee FAQ | Global Exchange. http://www.globalexchange.org/fairtrade/coffee/faq.
19 Ibid.
20 "Coffee Statistics." Coffee Statistics. http://www.e-importz.com/coffee-statistics.php.
21 "Taste of Coffee - Types of Coffee Drinks and Varieties." Medindia.
http://www.medindia.net/patients/patientinfo/coffee-types-varieties.htm.
22 Duff, Victoria. "Trends in the Coffee Market." Business & Entrepreneurship. http://yourbusiness.azcentral.com/trends -
coffee-market-15960.html.
23 Whinnie, Eric. "Competition in the Coffee Industry Is Heating Up." The Cheat Sheet. January 4, 2012.
http://www.cheatsheet.com/hot-feature/competition-in-the-coffee-industry-is-heating-up.html/.
24 "Coffee Market Settles Lower but Demand Remains Buoyant." International Coffee Organization.
http://www.ico.org/documents/cy2014-15/cmr-0315-e.pdf.
25 "Most Consumed Beverages in The World - Excluding Water." HubPages.April 13, 2015.
http://clivewilliams.hubpages.com/hub/Most-Consumed-Beverages.
26 "Topic: Tea Market." Www.statista.com. http://www.statista.com/topics/1513/tea-market/.
27 "Tea Fact Sheet." Tea USA News. http://www.teausa.com/14655/tea-fact-sheet.
28 Mcintyre, Douglas. "AnotherHurdle for Starbucks: More People Make Coffee at Home - DailyFinance."
DailyFinance.com. May 22, 2009. http://www.dailyfinance.com/2009/03/22/more-people-make-coffee-at-home-another-
hurdle-for-starbucks/
29 Coffee and Dessert - A Perfect Pair." Kraft Food.
http://www.kraftfoodservice.com/culinary/culinarytrends/beverages/coffeeanddessert.aspx.
30 Horowitz, Alana. "The One Office Perk You MUST Splurge On." Business Insider. March 17, 2011.
31 Jacques,Renee. "11 Reasons College Students Absolutely Need Coffee To Survive." The Huffington Post. September
1, 2014. http://www.huffingtonpost.com/2014/09/01/college-coffee_n_5711129.html.
32 Evans, Walker. "The Important Role of Coffee Shops in Neighborhood Development." ColumbusUndergroundcom.
March 17, 2013. http://www.columbusunderground.com/the-important-role-of-coffee-shops-in-neighborhood-
development.

9
Competitor Analysis
Coffee A B C D E F G H I J K L M N O P
Revenue
June2015
GrossProfit
December14
Current
ratio2014
December
Numberof
Stores2015
Shareprice
9/24/2015
Employees
December
2014
Ownership
Average
Priceper
product
2015
Countries
2015
Sector
2015
ROI
December
2015
MarketCap
2015
Market
Share
2015
Incorporated
Drive
Through
2015
PEratio
December
2015
1 Starbucks 18B 9B 1.37 21
K
57.1
2
191K P 4 67 C, S 43.06 84B 36% 1985 YES 32.089
9
2 McDonalds 26B 12
B
1.52 362
58
97.3
8
420K P 7 100 FF 26.98 91B 15.4% 1965 YES 22.541
7
3 Dunkin’ 748
M
644
M
1.24 113
00
48.4
1
1134 P 3 36 C, S 14.68 4B 19.8% 1950 YES 28.476
5
4 Wendy’s 2B 660
M
1.65 650
0
9.00 31200 P 6 30 FF 7.69 2B 4.1% 1929 YES 30
5 Panera 2B 546
M
1.15 1,9
26
189.
95
45400 P 8 246S FF 36.03 4B 2% 1981 YES 31.293
3
6 Jack in the
Box
1B 387
M
0.71 22
K
78.7
0
1915 P 7 18S FF 21.05 2B 1.8% 1951 YES 29.924
7 Dominos Pizza 2B 593
M
1.61 119
00
110.
29
11K P 14 80 PR 125.73 6B 9.8% 1960 NO 35.577
4
8 Yum! 13B 3B 0.68 415
46
78.3
2
537K P 8 140 FF 29.82 33B 8.7% 1997 YES 38.204
9
9 Coca-Cola 45B 28
B
1.02 350
0B
P
39.1
5
12920
0
P 3 200+ SP 13.64 170B 26.8% 1893 NO 22.761
6
10 Pepsi 65B 35
B
1.14 50
BP
92.4
7
271K P 1 200+ SP 19.17 135B 16.4% 1919 NO 21.355
7
11 Chipotle 4B 1B 3.58 150
0
731.
17
4590 P 9 42S MFF 40.43 22B 12.2% 1993 NO 44.802
1
12 Denny’s 489
M
138
M
0.7 170
0
11.6
1
8300 P 9 51S FF 32.93 966M 1988 YES 27.642
9
13 Krispy Kreme 509
M
90
M
2.56 1K 15.2
1
2800 P 3 24 FF 17.76 956M 0.3% 1937 NO 32.361
7
Ownership; P= Public
Sector; C = Coffee, S = Snacks, FF = Fast Food, PR = Pizza Restaurant, SP = Soda Production, M = Mexican
Countries; S= State
Number of Stores: BP = Beverage Product
Money: K = Thousand,M = Million, B = Billion

10
Competitor Analysis References
A1-A13, B1-13, C1-13, E1-13, F1-13, K1-13, L1-13, N1-13, P1-13
"Mergent Online." http://www.mergentonline.com.lib.pepperdine.edu/compsearch.asp.
D1, I1 "Company Information." Starbucks Coffee Company.
http://www.starbucks.com/about-us/company-information.
D2, I2 "Our Story.": McDonalds.com. http://www.mcdonalds.com/us/en/our_story.html.
D3, I3 "Company Snapshot." DunkinDonuts.com.
http://www.dunkindonuts.com/dunkindonuts/en/company.html.
D4, I4 "Wendy's Global Growth Vision." Wendy's. https://www.wendys.com/en-us/about-
wendys/global-growth-vision.
D5, I5 "We Are Panera." Our History. https://www.panerabread.com/en-us/company/about-
panera/our-history.html.
D6, I6 "Jack In The Box." Jack In The Box. http://www.jackinthebox.com/locations.
D7, I7 "Domino's International." Domino's International. https://biz.dominos.com/web/dominos-
around-the-world.
D8, I8 "Restaurant Counts." Yum! Brands. http://www.yum.com/investors/restcounts.asp.
D9, I9 "The Coca-Cola Company." Business Profile. http://assets.coca-
colacompany.com/48/a6/a93c6fec415e983e534ffa225144/TCCC_2010_Annual_Review_
Business_Profile.pdf.
D10, I10 "Who We Are." Brands Explore. http://www.pepsico.com/Brands/BrandExplorer#fun-for-
you.
D11, I11 "Chipotle Mexican Grill." Menuism. http://www.menuism.com/restaurant-
locations/chipotle-mexican-grill-164322/us.
D12, I12 "Denny's Restaurant Locations Directory." Denny's Restaurant Locations Directory.
http://locations.dennys.com/.
D13, I13 "Sharing the Joy around the World." Krispy Kreme Doughnuts.
http://investor.krispykreme.com/overview/default.aspx.
H1-13
“Fast Food Menu Price-Don't Be Surprised By The Cost of Fast Food." Fast Food Menu
Prices. http://www.fastfoodmenuprices.com/.
J1-13
"Industry Research." IBISWORLD. http://clients1.ibisworld.com.lib.pepperdine.edu/.
M1-13
"Industry Research." IBISWORLD. http://clients1.ibisworld.com.lib.pepperdine.edu/.

11
Strategic Recommendations
1. Growth in Asian markets
Starbucks has a strategy of opening many locations next to each other in the U.S; they have opened
many stores right next to each other in the same location. Their strategy is for one Starbucks store to
compete with another instead of competing with outside stores.1 However, this leads to
cannibalization. The United States has almost hit its limit for expansion and growth, but the world
still has plenty of customers and opportunities.
I would recommend that instead of opening so many stores in the U.S., Starbucks should use
that money for international expansion and growth in emerging markets like Brazil, India, China,
South Africa and Mexico. The most potential for long-term growth, is China. Understanding the
opportunities and challenges that Starbucks would face in China requires an appreciation for the
distinctive political, economic, sociocultural, and market forces shaping that country and its demand
for coffee. China has only one competitive domestic coffee producer – Li Shen. China is still
considered to have high market potential because of the young generation of wealthy coffee
drinkers.2
Starbucks opened its first international store in Tokyo, joint venture with Japanese retailer and
restaurant opener Sazabu.3 “Yet from the minute the store opened until it closed, customers lined up
40-50 people deep for a taste of Starbucks coffee. The Starbucks brand had the same power in Tokyo
that it had in New York and Seattle. It had taken an life of its own.” Said Howard Schultz.4
The global market for tea is largely concentrated in Asia, with premium and super-premium
brands experiencing strong sales.5 The key to success in the overseas expansion for Starbucks is to
take marketing advantage of playing its Teavana brand in Asian markets. New products can also be

12
tested in the international markets so that Starbucks does not put its brand reputation at risk in the
U.S.
2. Expand healthy product offerings
Starbucks unveiled six new Frappuccino flavors for their 20th anniversary: Cinnamon Roll-102g of
sugar (20 teaspoons), Caramel Cocoa Cluster with 97.3g (19 teaspoons), Red Velvet Cake Crème,
with 87g (17 teaspoons) of sugar. This constitutes for more than double the recommended daily
allowance of sugar for adults and around the same amount of sugar as 1 liter of coke.6
While the health fads and trends have come and gone, this time the category appears to have
serious stamina. 88% of 30,000 people surveyed are willing to pay more for healthier foods. All
demographics—from Generation Z to Baby Boomers–say they would pay more for healthy foods.7
As consumer tastes and lifestyle shifts towards more snacks and beverages options,
Starbucks should modify its menu and expand to give more healthy products options. This will help
cover the market of health conscious people who would normally not go to Starbucks because of the
high sugar content in most its beverages and snacks. Starbucks should also have a calorie count and
nutritional benefits for the products in the healthy section. This will attract more customers and give
them healthier options.
3. Expand the Tea and introduce juice product Line
Tea is the second most widely consumed beverage worldwide, following only water.8 Over one half
of the American population and four in five consumers drink tea.9 Tea is the biggest substitute for
coffee. Starbucks currently owns 2 tea brands – Tazo and Teavana and 1 juice and food brand,
Evolution fresh.10 I would recommend Starbucks to expand and market these product lines like they
do with their coffee products to provide customers with a wide variety of options.

13
Strategic Recommendations References
1 "Starbucks' Store Location Approach Examined." 10News. April 5, 2012.
http://www.10news.com/news/starbucks-store-location-approach-examined.
2 "Exporting a North American Concept to Asia: Starbucks in China." Sage Journals. May 1, 2005.
http://cqx.sagepub.com/content/46/2/275.full.pdf html.
3 Ibid.
4 "Virtual Road Trip: Starbucks Stores in Japan Honor Country's Design Aesthetic." Starbucks
Newsroom. August 21, 2014. https://news.starbucks.com/news/virtual-road-trip-japan.
5 Bolton, Dan. "Teavana's Global Ambitions." World Tea News. May 30, 2015.
http://www.worldteanews.com/news/teavanas-global-ambitions.
6 RICHARDS, VICTORIA. "Starbucks' New Frappuccinos Contain 'as Much Sugar as a Litre of
Coke." The Independent. June 10, 2015. http://www.independent.co.uk/life-style/food-and-
drink/news/starbucks-new-frappuccinos-contain-as-much-sugar-as-a-litre-of-coke-10310044.html.
7 "Consumers Want Healthy Foods--And Will Pay More For Them." Forbes. February 18, 2015.
http://www.forbes.com/sites/nancygagliardi/2015/02/18/consumers-want-healthy-foods-and-will-
pay-more-for-them/.
8 "Topic: Tea Market." Www.statista.com. http://www.statista.com/topics/1513/tea-market/.
9 "Tea Fact Sheet." Tea USA News. http://www.teausa.com/14655/tea-fact-sheet.
10 "Our Brands." Starbucks Coffee Company. http://www.starbucks.com/careers/brands.

14
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16
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17
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October 8, 2014. http://bostinno.streetwise.co/2014/10/08/starbucks-dunkin-donuts-and-
mcdonalds-which-coffee-has-the-most-caffeine/
-"Who We Are." Brands Explore. http://www.pepsico.com/Brands/BrandExplorer#fun-for-
you.
-"3 Reasons Why Starbucks Still Shines, Despite Market Shortcomings." Forbes. August 6,
2012. http://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-why-starbucks-
still-shines-despite-market-shortcomings/.
-"#737 Howard Schultz." Forbes. September 23, 2015.
http://www.forbes.com/profile/howard-schultz/.

18
EXHIBIT A: Key Executive Bios
Howard Schultz
Chairman and chief executive officer
Mr. Howard Schultz earned a bachelor’s degree from Northern Michigan University. He
worked with Xerox Corporation for three years in sales and marketing and was the Vice
President and general Manager of Hammarplast U.S.A before he joined Starbucks.
Mr. Schultz joined Starbucks in 1982, as the director of operations and marketing
when Starbucks had only four stores. After which he left Starbucks and started his own II
Giornale coffeehouses. He went to Italy and got inspired by the coffeehouse concept, which
he wanted to bring to the U.S. When he returned in August 1987, he bought the company
and became the chief executive officer. Mr. Schultz has served as chairman of the board of
directors since our inception in 1985, and in January 2008, he reassumed the role of
president and chief executive officer. From June 2000 to February 2005, Mr. Schultz also
held the title of chief global strategist.
Mr. Schultz has won many awards. Fortune 2011 named him businessperson of the
year; Northwestern University’s Kellogg School of Management honored him with the
Distinguished Leadership Award. He also won the Horatio Alger Award, among others.
Adam Brotman
Chief digital Officer
Mr. Brotman received his Bachelor of Arts degree from University of California, Los
Angeles and Juris Doctor from the University of Washington. He has had leadership
positions at leading digital media companies including being the CEO of Barefoot Yoga
Company. He was also the Senior Vice President at Corbis and founded PlayNetwork, Inc.
He serves on the Neiman Marcus Group, Inc. board of directors and the University of
Washington Master of Communication in Digital Media advisory board.
Mr. Brotman joined Starbucks in April 2009 and leads Starbucks core digital businesses,
including mobile and mobile payments, web card, loyalty, e-commerce, WI-FI, and the
Starbucks Digital Network.
Sharon Rothstein
Global Chief Marketing Officer
Ms. Rothstein earned her M.B.A from the University of California, Los Angeles and her
Bachelor of Commerce from the University of British Columbia. She held senior marketing
and brand management position with Godiva, Starwood Hotels and resorts, and Procter &
Gamble. She was also the senior vice president of marketing at Sephora.
Ms. Rothstein joined in April 2013 and is responsible for stewardship of Starbucks
and its emerging brands including Evolution Fresh, Tazo and Teavana. She leads the
creation of the brand narrative for Starbucks and channel development, marketing
initiatives, creative expressions, advertising and key business partnerships. She also has
responsibility for leading Starbucks global creative studio, global digital marketing team
and global category brand management.
Michael Conway
President, Starbucks Global Channel Development

19
Mr. Conway holds a Bachelor of Arts degree from Duke University and Master of Business
Administration degree from The Wharton School of the University of Pennsylvania. He
serves on the Board of Directors of McCormick & Company; he was also the worldwide
president of McNeil Nutritionals.
Mr. Conway joined Starbucks in May 2013 and is responsible for Starbucks
Channel Development business. Michael and the channel development team lead all
aspects of the channel business including strategy, planning, branding, sales and marketing
for a portfolio of CPG products.
Curt Garner
Chief information officer
Curt graduated from the Ohio State University in 1991 with a Bachelor’s Degree in
economics. He had various leadership positions within Wendy’s International Inc.
Mr. Garner joined Starbucks in January of 1998, as director of international IT. He
then became the vice president of international systems and Technology. He moved from
the international team into the role of vice president, Global Retail Technology in January
2008 and then served as senior vice president of Business Technology. He now oversees
Starbucks global technology and engineering services for all Starbucks businesses. He
reports to Starbucks chief operating officer Troy Alstea and serves as a member of
Starbucks senior leadership Team.
Kevin Johnson
President and chief operating officer
Kevin received his Bachelor of Arts in Business Administration from New Mexico State
University. He served as the President of the platforms division at Microsoft Corporation
for 16 years. He then became the CEO of Juniper Networks, Inc., from September 2008
through December 2013. He is also the founding board member of a non-profit
organization, NPower.
Mr. Johnson joined Starbucks in 2015 and serves on the company’s board of
directors since 2009. He leads the global operating businesses across the Americas, Europe,
Middle East, Africa and China as well as the supply chain, information technology, and
mobile and digital platforms. He reports directly to Howard Schultz and partners closely
with Cliff Burrows, John Culver and company’s global finance, technology, and supply
chain operational leader
Cliff Burrows
Group president U.S., Americas and Teavana
Cliff completed his education in UK and started his career with Littlewoods pic as a
management trainee. He then worked as the managing director for Habitat for 19 years.
Cliff joined Starbucks in 2001 as the managing director of UK; after which, in 2006 he was
named the president for Starbucks Coffee EMEA B.V. He was then responsible for the
company’s U.S. operations from March 2008-Octoner11 and then became president of
Starbucks Coffee U.S. and Americas from 2011-2013.
Mr. Burrows is now a group president and is responsible for all operations in the
United States, Canada, Latin America and the expansion of teavana retail stores. He is also
known for his strong leadership and commitment to the company’s mission.

20
Key Executive Bios Reference
"Leadership." Starbucks Newsroom. https://news.starbucks.com/leadership.

21
Exhibit B: Company Financial
Balance sheet as of 2012, 2013, 2014
Starbucks Corp. (NMS: SBUX)
Exchange rate used is that of the Year End reported date
As Reported Annual Balance Sheet
Report Date 09/28/2014 09/29/2013 09/30/2012
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Cash & cash equivalents 1708400 2575700 1188600
Short-term investments - available-for-sale securities 63200 591500 790800
Short-term investments - trading securities 72200 66600 57600
Short-term investments 135400 658100 848400
Accounts receivable, gross 637700 567100 491500
Allowance for doubtful accounts 6700 5700 5600
Accounts receivable, net 631000 561400 485900
Coffee - unroasted 432300 493000 711300
Coffee - roasted 238900 235400 222200
Other merchandise held for sale 265700 243300 181600
Packaging & other supplies 154000 139500 126400
Inventories 1090900 1111200 1241500
Prepaid expenses & other current assets 285600 287700 196500
Deferred income taxes, net 317400 277300 238700
Total current assets 4168700 5471400 4199600
Long-term investments 318400 58300 116000
Equity method investments 469300 450900 393900
Cost method investments 45600 45600 66000
Equity & cost investments 514900 496500 459900
Land 46700 47000 46200
Buildings 278100 259600 225200
Leasehold improvements 4858400 4431600 3957600
Store equipment 1493300 1353900 1251000
Roasting equipment 410900 397900 322800
Furniture, fixtures & other property, plant & equipment 1078100 949700 836200
Work in progress 415600 342400 264100
Property, plant & equipment, gross 8581100 7782100 6903100
Accumulated depreciation 5062100 4581600 4244200
Property, plant & equipment, net 3519000 3200500 2658900
Deferred income taxes, net 903300 967000 -
Long-term deferred tax assets - - 97300
Other intangible assets - - 143700
Other assets - - 144700
Total other assets - - 385700

22
Other assets 198900 185300 -
Other intangible assets 273500 274800 -
Goodwill 856200 862900 399100
Total assets 10752900 11516700 8219200
Accounts payable 533700 491700 398100
Accrued litigation charge - 2784100 -
Accrued compensation & related costs 437900 420200 381600
Accrued occupancy costs 119800 120700 126900
Accrued taxes 272000 125000 138300
Accrued dividend payable 239800 195800 157400
Other accrued liabilities 444900 407600 329600
Accrued liabilities 1514400 1269300 1133800
Insurance reserves 196100 178500 167700
Deferred revenue 794500 653700 510200
Total current liabilities 3038700 5377300 2209800
Senior notes 2048300 1299500 549600
Long-term debt 2048300 1299400 549600
Deferred rent - - 201900
Unrecognized tax benefits - - 78400
Asset retirement obligations - - 42600
Other long-term liabilities - - 22400
Other long-term liabilities - - 345300
Other long-term liabilities 392200 357700 -
Total liabilities 5479200 7034400 3104700
Common stock 700 800 700
Additional paid-in capital 39400 282100 39400
Retained earnings (accumulated deficit) 5206600 4130300 5046200
Net unrealized gains (losses) on available-for-sale
securities - -500 -100
Net unrealized gains (losses) on hedging instruments - 13900 -72100
Available-for-sale securities -400 - -
Cash flow hedges 46300 - -
Net investment hedges 3200 - -
Translation adjustment -23800 53600 94900
Accumulated other comprehensive income (loss) 25300 67000 22700
Total shareholders' equity 5272000 4480200 5109000
Noncontrolling interest 1700 2100 5500
Total equity 5273700 4482300 5114500

23
Income Statement as of 2012, 2013, 2014
Starbucks Corp. (NMS: SBUX)
Exchange rate used is that of the Year End reported date
As Reported Annual Income Statement
Report Date 09/28/2014 09/29/2013 09/30/2012
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Company-operated stores revenues 12977900 11793200 10534500
Licensed stores revenues 1588600 1360500 1210300
Global consumer products group (CPG), foodservice & other
revenues 1881300 1738500 1554700
Total net revenues 16447800 14892200 13299500
Cost of sales including occupancy costs 6858800 6382300 5813300
Store operating expenses 4638200 4286100 3918100
Other operating expenses 457300 457200 429900
Depreciation & amortization expenses 709600 621400 550300
General & administrative expenses 991300 937900 801200
Litigation charge (credit) -20200 2784100 -
Total operating expenses 13635000 15469000 11512800
Income from equity investees 268300 251400 210700
Operating income (loss) 3081100 -325400 1997400
Interest income & other income, net 142700 123600 94400
Interest expense 64100 28100 32700
Earnings (loss) before income taxes - United States 2572400 - -
Earnings (loss) before income taxes - foreign 587300 - -
Earnings (loss) before income taxes 3159700 -229900 2059100
Current United States federal income taxes expense (benefit) 822700 616600 466000
Current United States state income taxes expense (benefit) - - 79900
Current United States state & local income taxes sxpense (benefit) 132900 93800 -
Current foreign income taxes expense (benefit) 128800 95900 76800
Total current income taxes expense (benefit) 1084400 806300 622700
Deferred United States federal income taxes expense (benefit) 12000 -898800 49200
Deferred United States state income taxes expense (benefit) - - -700
Deferred United States state & lcoal income taxes expense (benefit) -4900 -144000 -
Deferred foreign income taxes expense (benefit) 500 -2200 3200
Total deferred income taxes expense (benefit) 7600 -1045000 51700
Income tax expense (benefit) 1092000 -238700 674400
Net earnings (loss) including noncontrolling interests 2067700 8800 1384700
Net earnings (loss) attributable to noncontrolling interests 400 -500 -900
Net earnings attributable to Starbucks Corporation 2068100 8300 1383800
Weighted average shares outstanding - basic 1506200 1498600 1508800
Weighted average shares outstanding - diluted 1526200 1524600 1546000
Year end shares outstanding 1499000 1506400 1498600
Net earnings (loss) per share - basic 1.375 0.005 0.915
Net earnings (loss) per share - diluted 1.355 0.005 0.895
Cash dividends declared per share 0.55 0.445 0.36
Total number of employees 191000 182000 160000
Number of common stockholders 17800 18470 18500

24
Cash Flow Statement as of 2012, 2013, 2014
Starbucks Corp. (NMS: SBUX)
Exchange rate used is that of the Year End reported date
As Reported Annual Cash Flow
Report Date 09/28/2014 09/29/2013 09/30/2012
Currency USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes
Scale Thousands Thousands Thousands
Net earnings (loss) including noncontrolling interests 2067700 8800 1384700
Depreciation & amortization 748400 655600 580600
Litigation charge - 2784100 -
Deferred income taxes, net 10200 -1045900 61100
Income earned from equity method investees -182700 -56200 -49300
Distributions received from equity method investees 139200 - -
Loss (gain) resulting from sale/acquisition of joint ventures - -80100 -
Loss (gain) resulting from sale of equity in joint ventures & certain retail
operations -70200 - -
Stock-based compensation 183200 142300 153600
Excess tax benefit on share-based awards -114400 - -
Other adjustments 36200 23000 23600
Accounts receivable -79700 -68300 -90300
Inventories 14300 152500 -273300
Accounts payable 60400 88700 -105200
Accrued litigation charge -2763900 - -
Income taxes payable, net 309800 - -
Accrued liabilities & insurance reserves 103900 87600 23700
Deferred revenue 140800 139900 60800
Prepaid expenses, other current assets & other assets 4600 76300 -19700
Net cash flows from operating activities 607800 2908300 1750300
Purchase of investments -1652500 -785900 -1748600
Sales of investments 1454800 - -
Maturities & calls of investments 456100 - 1796400
Sales, maturities & calls of investments - 1040200 -
Acquisitions, net of cash acquired - -610400 -129100
Additions to property, plant & equipment -1160900 -1151200 -856200
Proceeds from sale of equity in joint ventures & certain retail operations 103900 - -
Proceeds from the sale of property, plant, & equipment - 15300 5300
Proceeds from sale of equity in joint ventures - 108000 -
Other investing activities -19100 -27200 -41800
Net cash flows from investing activities -817700 -1411200 -974000
Proceeds from issuance of long-term debt 748500 749700 -
Principal payments on long-term debt - -35200 -
Proceeds (payments) on short-term borrowings - - -30800
Purchase of noncontrolling interest - - 0
Proceeds from issuance of common stock 139700 247200 236600
Excess tax benefit from share-based awards 114400 258100 169800
Cash dividends paid -783100 -628900 -513000
Repurchase of common stock -758600 -588100 -549100
Minimum tax withholdings on share-based awards -77300 -121400 -58500
Other financing activities -6900 10400 -500

25
Net cash flows from financing activities -623300 -108200 -745500
Effect of exchange rate changes on cash & cash equivalents -34100 -1800 9700
Net increase (decrease) in cash & cash equivalents -867300 1387100 40500
Cash & cash equivalents, beginning of period 2575700 1188600 1148100
Cash & cash equivalents, end of period 1708400 2575700 1188600
Cash paid during the period for interest, net of capitalized interest 56200 34400 34400
Cash paid during the period for income taxes, net of refunds 766300 539100 416900