Starbucks Corporation (Starbucks) operates as a premier roaster, marketer, and retailer of specialty coffee in the world.
The company purchases and roasts high-quality coffees that it sells, along with handcrafted coffee, tea, and other beverages and a variety of high-quality food items through company-operated stores. The company also sells a variety of coffee and tea products and licenses its trademarks through other channels, such as licensed stores, as well as grocery and foodservice throug...
Starbucks Corporation (Starbucks) operates as a premier roaster, marketer, and retailer of specialty coffee in the world.
The company purchases and roasts high-quality coffees that it sells, along with handcrafted coffee, tea, and other beverages and a variety of high-quality food items through company-operated stores. The company also sells a variety of coffee and tea products and licenses its trademarks through other channels, such as licensed stores, as well as grocery and foodservice through its Global Coffee Alliance with Nestlé S.A. (Nestlé). In addition to its flagship Starbucks Coffee brand, the company sells goods and services under the following brands: Teavana, Ethos, and Starbucks Reserve.
The company offers consumers new, innovative coffee and other products in a variety of forms, across new categories, diverse channels, and alternative store formats. The company is committed to responsible and ethical sourcing led by Coffee and Farmer Equity Practices (C.A.F.E. Practices), the company’s third-party verification program and the cornerstone of its approach to ethical sourcing of coffee with over 98% of its coffee having been historically verified through C.A.F.E. Practices as ethically sourced.
Segments
The company operates through three segments: North America, which is inclusive of the U.S. and Canada; International, which is inclusive of China, Japan, Asia Pacific, Europe, Middle East, Africa, Latin America, and the Caribbean; and Channel Development.
North America and International segments include both company-operated and licensed stores. The company’s North America segment is its most mature business and has achieved significant scale. Certain markets within the company’s International operations are in various stages of development and may require more extensive support, relative to their current levels of revenue.
Channel Development segment includes roasted whole bean and ground coffees, Starbucks-branded single-serve products, a variety of ready-to-drink beverages, such as Frappuccino and Starbucks Doubleshot, foodservice products, and other branded products sold worldwide outside of the company’s company-operated and licensed stores. A large portion of the company’s Channel Development business operates under a licensed model of the Global Coffee Alliance with Nestlé, while its global ready-to-drink businesses operate under collaborative relationships with PepsiCo, Inc., Tingyi-Ashi Beverages Holding Co., Ltd., Arla Foods amba, Nestlé, and others.
Company-operated Stores
The company’s retail objective is to be the leading retailer and brand of coffee and tea in each of its target markets by selling the finest quality coffee, tea, and related products, as well as complementary food offerings, and by providing each customer with a unique Starbucks Experience. The Starbucks Experience is built upon superior customer service, convenience, and a seamless digital experience as well as safe, clean, and well-maintained stores that reflect the personalities of the communities in which they operate, thereby building a high degree of customer loyalty.
The company’s strategy for expanding its global retail business is to increase its category share in a disciplined manner, by selectively opening additional stores in new and existing markets, as well as increasing sales in existing stores, to support its long-term strategic objective to maintain Starbucks standing as one of the most recognized and respected brands in the world. Store growth in specific existing markets will vary due to many factors, including expected financial returns, the maturity of the market, economic conditions, consumer behavior, and the local business environment.
Starbucks company-operated stores are typically located in high-traffic, high-visibility locations. The company’s ability to vary the size and format of its stores allows it to locate them in or near a variety of settings, including downtown and suburban retail centers, office buildings, university campuses, and rural and off-highway locations. The company is continuing the expansion of its stores, particularly drive-thru formats that provide a higher degree of access and convenience, as well as other store formats that cater to a variety of customer needs.
Stored Value Cards and Loyalty Program
The company’s branded stored value card program (the Starbucks Card) is designed to provide customers with a convenient payment method, support gifting, and increase the frequency of store visits by cardholders, in part through the related Starbucks Rewards loyalty program. Starbucks Cards are issued to customers when they initially load them with an account balance. They can be obtained in the company-operated and most licensed stores in North America, China, Japan, and many of its other markets in its International segment. Starbucks Cards can also be obtained online, via the Starbucks Mobile App, and through other U.S. and international retailers. Customers may access their card balances by utilizing their Starbucks Card or the Starbucks Mobile App in participating stores. In nearly all markets, including the U.S. and Canada, customers who register their Starbucks Cards are automatically enrolled in the Starbucks Rewards program. Registered members can receive various benefits depending on factors such as the number of reward points (Stars) earned. In addition to using their Starbucks Cards, Starbucks Rewards members can earn Stars by paying with cash, credit or debit cards, or selected mobile wallets at all company-operated stores and a majority of licensed stores in North America. Using the Mobile Order and Pay functionality of the Starbucks Mobile App, customers can also place orders in advance for pick-up at certain participating locations in several markets.
Licensed Stores
Revenues from the company’s licensed stores accounted for 12% of total net revenues in fiscal 2024. In its licensed store operations, the company seeks to leverage the expertise of its local partners and share its operating and store development experience. Licensees provide improved, and at times the only, access to desirable retail space. Most licensees are prominent retailers with in-depth market knowledge and access. As part of these arrangements, the company sells coffee, tea, food, and related products to licensees for resale to customers and receive royalties and license fees from the licensees. The company also sells certain equipment, such as coffee brewers and espresso machines, to its licensees for use in their operations. Licensee employees working in licensed retail locations are required to follow the company’s detailed store operating procedures and attend training classes similar to those given to employees in company-operated stores. In a limited number of international markets, the company also uses traditional franchising and include these stores in the results of operations from its other licensed stores.
Other Revenues
Other revenues primarily are recorded in the company’s Channel Development segment and include sales of packaged coffee, tea, and ready-to-drink beverages to customers outside of its company-operated and licensed stores, as well as royalties received from Nestlé under the Global Coffee Alliance and other collaborative partnerships.
Product Supply
Starbucks is committed to selling the finest whole bean coffees and coffee beverages. To help ensure compliance with its rigorous coffee standards, the company generally controls substantially all coffee purchasing, roasting, and packaging, and the global distribution of coffee used in its operations. Nestlé controls distribution of Starbucks packaged coffee products outside of Starbucks stores through the Global Coffee Alliance, and in some cases, also roasts and packages these products.
Trademarks, Copyrights, Patents, and Domain Names
Some of the company’s trademarks, including Starbucks, the Starbucks logo, Starbucks Reserve, and Frappuccino, are of material importance. The company holds patents on certain products, systems, and designs, which have an average remaining duration of approximately thirteen years. In addition, Starbucks has registered and maintains numerous Internet domain names, including Starbucks.com, Starbucks.net, and Starbucksreserve.com.
Seasonality
The company’s business is subject to moderate seasonal fluctuations, of which its second fiscal quarter typically experiences lower revenues and operating income. Additionally, as Starbucks Cards are issued to, and loaded by, customers during the holiday season, the company tends to have higher cash flows from operations during the first quarter of the fiscal year (Year Ended September 29, 2024). However, since revenues from Starbucks Cards are recognized upon redemption and not when cash is loaded onto the Starbucks Cards, the impact of seasonal fluctuations on the consolidated statements of earnings is much less pronounced.
History
Starbucks Corporation was founded in 1971. The company was incorporated in 1985.