Starbucks' CEO Howard Schultz Outlines Growth Strategy To Shareholders

March 25, 2011
Starbucks' CEO Howard Schultz Outlines Growth Strategy To Shareholders

Celebrating 40 years of history and reaffirming solid growth plans for the future, Starbucks Corp. hosted its 20th annual shareholders' meeting, with more than 2,000 in attendance. Starbucks leadership team, led by Howard Schultz, chairman, president and CEO, honored the company's 40-year history of providing exceptional coffee, world-class customer experience, commitment to its partners (employees) and dedication to operating as a responsible corporate citizen. The management team also reaffirmed growth plans for a new, evolved business. The focus remains on building a truly global consumer company by harnessing a powerful portfolio of brands with a unique business model, combining a global retail footprint with a significant Consumer Products (CPG) business, and leveraging direct customer engagement that drives growth across all channels globally.

"Over our 40-year history, we have built the Starbucks brand with a goal of staying true to our values and our guiding principles with a deep sense of humanity," said Schultz in a prepared statement. "Going forward, we will continue to focus on what made us a different kind of company, one that balances profitability and social conscience while providing exceptional shareholder value."

At the meeting, Starbucks reiterated its commitment to delivering the world's best coffee in every format and through every channel. The company highlighted the successful launch of its Starbucks VIA® Ready Brew platform and its recent announcements of strategic relationships with Green Mountain Coffee Roasters, Inc. (GMCR) and Courtesy Products.

"We are particularly excited about the progress we are making in the premium single-cup segment," commented Jeff Hansberry, president, Starbucks Global Consumer Products and Foodservice. "The single-cup segment is already a $1.6 billion segment that represents a significant growth engine for the entire U.S. coffee category. We believe that over time we can generate K-Cup® portion pack system sales in excess of $1 billion across all channels."

Starbucks also provided additional details around its previously announced relationship with Courtesy Products, the nation's leading provider of in-room coffee service to hotels. Under the relationship, Starbucks and Courtesy will bring Starbucks® coffee to 500,000 luxury and premium hotel rooms in the U.S., as well as offer an on-demand, single-cup brewing system featuring Starbucks® and Seattle's Best Coffee® ground coffee and Tazo® teas for sale in multiple channels exclusively through the Starbucks Global Consumer Products group. "We are proud to be working with Courtesy to provide great Starbucks coffee to hotel guests, and a value-oriented single-cup brewed coffee system to consumers across the U.S.," added Hansberry.

The company also announced a 10-year extension to its exclusive strategic agreement with Autogrill's HMSHost, one of Starbucks first licensee partners. Under this agreement, HMSHost will continue to build and operate Starbucks locations in airports and motorway travel plazas across the U.S.

"For nearly 20 years, Starbucks and HMSHost have successfully brought the Starbucks Experience to millions of travelers who are looking for an exceptional cup of coffee," stated Cliff Burrows, president, Starbucks Coffee U.S. "We are very excited to extend our relationship with HMSHost for another 10 years."

Currently, Autogrill's HMSHost operates more than 360 Starbucks locations in airports, on motorways and in railway stations in North America and Europe. The continuance of these strategic relationships will foster further growth opportunities as well as the development of innovative store concepts to serve the global traveler.

Starbucks leadership discussed the tremendous runway for international growth in the retail space as well as in CPG and foodservice channels not only in current markets but also in new and emerging countries. With recently announced plans to enter the India market, and continued successful growth in China where the company expects to have over 1,500 stores by 2015, Starbucks is poised to ramp up its burgeoning international business through disciplined store growth, improved operations, targeted innovation, local relevance in product and store design, and one-voice marketing.

"Starbucks China is an incredibly successful business, outperforming the U.S. in terms of average store profitability," said Annie Young-Scrivner, Starbucks chief marketing officer. "Even though we are not yet in every city and we've spent very little on advertising, Starbucks is recognized as one of the top 20 brands in China. Our ambition is bold; we expect to more than triple our foot print by 2015."

With nearly 6,000 stores in 54 countries outside the U.S., it is clear that the affinity for the Starbucks brand is remarkably strong in every market and that the Starbucks Experience truly translates globally. Starbucks has the ambition and capability to bring great coffee to more people in more parts of their lives than ever before. The company believes there is a significant, untapped opportunity still ahead.

The company reviewed a year of strong financial results and outlined the blueprint for continued success. Starbucks exited fiscal 2010 and entered fiscal 2011 with record-setting financial results driven by the return of top line growth and continued operational efficiencies that resulted in dramatic margin and earnings acceleration throughout the year. This record-setting performance and the underlying health of the business establish a strong foundation from which to pursue multiple avenues of future profitable growth.

"Starbucks is now playing from a position of strength, with a healthy financial foundation and renewed confidence from which we can pursue the abundant opportunities for growth," Troy Alstead, Starbucks chief financial officer added. "We are intent on capturing a larger share of coffee consumption, reaching consumers wherever and whenever they want great coffee."

The company reiterated diversified opportunities for growth in a number of platforms including store segmentation and innovation in store designs, development of products such as Starbucks VIA®, growth in brands such as Seattle's Best Coffee and expansion of channels of distribution beyond the Starbucks stores, all of which provide abundant opportunities to reach more and more customers during more coffee occasions.

Additionally, Starbucks highlighted its continued efforts to connect with customers in the digital and mobile space, creating a Fourth Place experience for ongoing engagement and future innovation. The company's involvement with social media, leadership in loyalty and mobile through its Starbucks Card and My Starbucks Rewards programs were featured during the onstage presentation. The company also announced four new content partners to the in-store Starbucks Digital Network, all of which are offering free access to their subscription-level content to Starbucks customers.