Starbucks Financial Analysis Highlights Strong Performance

Starbucks Coffee Company, Page 1 of 25
Starbucks Coffee Company Financial Analysis
Emma Scymanski, Jonathan Stewart, Matthew S. Urdan, Angelica Walker
MBA 640: Financial Decision Making
Professor Osman Kilic
Quinnipiac University
December 20, 2015

Starbucks Coffee Company Financial Analysis
“Starbucks is a performance driven organization through the lens of humanity. ‘That’s
what I’ve imprinted on the entire organization over the last two years.’ Performance is
the price of admission (Starbucks stock price in November 2008 was $7.17/share,
compared with $80/share in December 2014. Company market cap is $60 Billion) and we
have proven we are best in class, but it is about more than numbers. It’s about the body of
work. The rules of engagement for a public company have changed. Companies now
must do more for their people and the communities they serve.” (Starbucks Coffee
Company, 2014, para 4).
Macroeconomic Review.
Starbucks Coffee Company (SBUX) is an American Corporation that began operations in
Seattle, Washington in 1985. The company operates as a roaster, marketer, and retailer of
specialty coffee worldwide and seller of packaged roasted whole bean and ground coffees,
packaged tea, single serve products, juices and bottled water. SBUX has recently expanded its
product offerings (Appendix A) to include fresh food products, pastries, breakfast and lunch
sandwiches, Paninis and other items as well as beverage-making equipment and accessories
(Starbucks Coffee Company, 2015). Product diversification and expansion increases sales across
all dayparts and attracts a broad range of consumers.
The coffeehouse industry in the United States is forecasted to generate more than $31
billion in 2015 (Statista, 2015). SBUX is the largest coffeehouse chain worldwide (Statista,
2015). SBUX now competes outside of its segment with the giants of the wider restaurant
industry, such as McDonald’s. SBUX and Dunkin’ Donuts (DNKN), its closest segment
competitor, commanded a combined U.S. market share of nearly 50 percent in 2014 (Statista,
2015).
The international coffee market is expected to grow 25% internationally in the next five
years, mainly in China, Latin America and India. While coffee demand is expected to jump to
175.8 million bags of beans by 2020, up from 141.6 million bags in 2015, climate change

induced drought in Brazil, which supplies 45% of the world’s coffee beans, is reducing supply
and leading to price increases (Bariyo, 2015). After the severity of the drought impact on the
Brazil coffee crop was discovered, the price of coffee increased 70% (Lingenheld, 2015).
Further affecting coffee supply, “Central American coffee farmers are battling a fungus
called ‘coffee rust’ or ‘roya,’ that’s caused more than $1 billion in crop damages already” by
infecting about 40% of Colombia’s crop (Lingeheld, 2015). Additionally, producing country
consumption “is growing twice as fast as importing countries” as Brazil, Vietnam and Columbia
are becoming their own top customers. Greater internal coffee consumption, resulting in
decreased coffee exports, is expected to reduce global coffee bean exports and exert increasingly
upward global price pressure, (Lengenheld, 2015).
Economies of scale and corporate commodity hedging (Banham, 2011) help SBUX
endure price fluctuations. Product diversification and doubling down on tea with the recent
purchase of Teavana provides an additional hedge against coffee price fluctuations while
strongly contributing to SBUX’s growth and profitability (Levine-Weinberg, 2014).
Premium coffee demand drivers are disposable income, per capita coffee consumption,
attitudes towards health, personal preferences, global pricing of coffee and demographics.
Demand is quite sensitive to the macroeconomic factors that affect disposable income. During a
recession, for example, household disposable incomes decline and the ability to purchase
commodities, such as coffee, also declines. However, the SBUX coffee-drinking experience
environment and marketing as a ‘lifestyle brand’ provides another hedge against price pressure,
especially in China where “Chinese customers have come to expect spacious branches with
ample comfortable seating…Starbucks to them is as cozy as their own home, and more
functional than their office” (Law, 2014, para 13).

SWOT Analysis.
In addition to SBUX’s exceptional executive leadership team detailed in Appendix C, the
greatest strength for SBUX may be its brand image and company perception. Through savvy
digital and social media marketing, its outstanding customer service and the ‘Starbucks
Experience,’ SBUX has created exceptionally loyal customers. Its best in class ‘Starbucks
Rewards’ program, spearheaded by Rothstein and Brotman, leverages customer loyalty while
driving same store sales and cash flow through prepaid sales of gift cards, Rewards Cards, and
the Starbucks Mobile App (Elgan, 2014).
Because SBUX offers premium products, it has premium prices. As a weakness, this is
magnified in times of economic recession. Taste is a weakness as well. “Consumer Reports
magazine…found …the SBUX brew ‘was strong, but burnt and bitter enough to make your eyes
water instead of open.’ The March, 2007 issue of the magazine, advises, ‘Try McDonald’s,
which was cheapest and best.’ Several other more recent blind taste tests have consistently rated

Dunkin’ Donuts and MacDonald’s as the best tasting and Starbucks as the worst tasting coffee
sampled” (Weinberg, 2011, para 5). Another substantial weakness is that SBUX is dependent on
the US operating segment for more than half of its total revenue. International markets are not as
profitable as domestic markets. Additionally, SBUX does not adapt to local cultures. It clones its
stores, regardless of location, without consideration of cultural preferences and price.
SBUX has two major areas for growth that fit into the company’s overall growth strategy
(Appendix B): international expansion and the expansion of daypart sales. EMEA (Europe,
Middle East, Africa) expansion would build on more than 6.4 million transactions weekly via
2,100 stores in 37 countries. 50% of global coffee consumption occurs in the EMEA region.
Additionally, the China and Asia Pacific region represents the single largest and fastest growing
retail opportunity. SBUX currently opens one new store daily in the region. (Starbucks Coffee
Company, 2015). Increasing afternoon and evening daypart sales is also a critical component of
increasing same store sales. Big Data analytics, the Starbucks Rewards program, the Mobile
App and online ordering are all driving targeted marketing efforts that increase conversion and
drive increased store traffic.
Lastly, SBUX faces four major threats to its continued growth and success: Economic
Sensitivity, Global Expansion Barriers, Coffee Price and Climate Change. As a seller of higher-
priced premium coffee and other products, the company is vulnerable to economic downturns.
SBUX “experienced a net loss after the recession of 2009. During this time, American
consumers turned toward cheaper alternatives, such as instant coffee and Starbucks‘ number-one
competitor: Dunkin’ Brands” (Krikorian, 2014, para 1). The price of coffee itself is also a major
concern. “Coffee price volatility is still a risk factor, even if Starbucks does hedge against price
increases. The price movement and direction would affect Starbucks’ operating costs and

margins. Coffee price could rise due to a number of factors. Much of Starbucks’ coffee is
sourced from South American and Asian nations such as Brazil and Vietnam. Instability in the
local political environment would definitely influence coffee prices. Likewise, poor crop yield
due to weather could cause the price per pound to skyrocket, depending on the extent of the
damage” (Krikorian, 2014, para 3). These threats became real in 2015 when Brazilian drought
and Costa Rican crop disease reduced bean production and supply. Coupled with increasing
demand, coffee prices began to increase (Bariyo, 2015). While SBUX’s international growth
plans are aggressive, growing market share has been difficult. For example, “Starbucks partnered
with TATA group, an Indian conglomerate, with the hopes of securing a stable supply chain in
the region. However, the middle class in India hasn’t grown quickly enough to accommodate $3
lattes” (Krikorian, 2014, para 2). Future growth depends on international expansion, but taste
differences, as well as economic troubles affecting certain regions, remain challenges.
Financial Analysis.
“We expect Starbucks will continue to deliver solid performance gains as it grows its
store footprint, mainly in international markets, and remains focused on product
innovation.” (Stone quoting Standard and Poor’s, 2015, para 4).
If a company is outperforming the S&P 500 along with all of its market segment and industry
competitors, it is likely a very strong company financially. The two graphs from YCharts below
emphatically demonstrate SBUX’s increasingly strong financial performance over the last five
years. In the first graph, SBUX is represented by the orange line, while direct competitor DNKN
is represented by the blue line, Krispy Kreme (KK) by the red line and the S&P 500 by the
purple line. In the second graph, SBUX is represented by the blue line, McDonald’s is
represented by the orange line, Chipolte Mexican Grill by the red line and the S&P 500 by the
green line. Clearly, all of these companies, with the exception of McDonald’s which has

struggled of late, are outperforming the S&P 500. However, during 2015, SBUX’s performance
has been exceptionally strong relative to the S&P 500 while its competitors have weakened
considerably and fallen more in line with the Index.
(YCharts, 2015)
(YCharts, 2015)
Liquidity. The Current Ratio, Quick Ratio and Cash Ratio are all measures of Liquidity. A
current ratio with a value of at least 1 indicates a company has current liquid assets that can
cover all of its current liabilities. SBUX has maintained an average current ratio of 1.46 over the
last five years (S&P Capital IQ, 2015). SBUX also enjoys a favorable five year average cash
ratio of 0.4586 (S&P Capital IQ, 2015). These two ratios indicate SBUX’s ability to fulfill its
short term financial obligations is strong. DNKN’s five year average current ratio of 1.38 and
five year average cash ratio average of 0.7645 also shows favorable short term solvency (S&P
Capital IQ, 2015). KK has maintained a five-year average current ratio of 2.42 and a five year

average cash ratio of 1.05 (S&P Capital IQ, 2015). Although the high current ratio of KK
supports financial strength, it may indicate that KK is becoming cash heavy and has
inefficiencies in investing surplus cash (S&P Capital IQ, 2015).
Current Ratio 2011 2012 2013 2014 2015
Starbucks 1.8282 1.9004 1.0175 1.3719 1.1914
Dunkin' Donuts 1.2841 1.1874 1.3412 1.245 1.8776
Krispy Kreme 1.55 2.34 2.89 2.75 2.56
Starbucks, Dunkin’ Donuts andKrispyKreme have maintainedstrongcurrent ratios overthe last five years (S&P Capital IQ,2015)
.
Because inventory is not as liquid as cash and other short term financial instruments, we also
look at the Quick Ratio, which again is strong for all three companies.
Quick Ratio 2011 2012 2013 2014 2015
Starbucks 1.3629 1.3386 0.8109 1.0129 0.8338
Dunkin' Donuts 0.9 0.8 0.9 0.7 1.2
Krispy Kreme 1.2 2.04 2.62 2.39 2.19
(S&P Capital IQ, 2015)
Very short term creditors may be interested in the Cash Ratio as well. All three companies
generate great amounts of cash on a daily basis due to the nature of the food service industry,
therefore this ratio may not be as important as it would be for a retail company like Walmart that
is inventory intensive, or a manufacturing company like General Motors. Even so, as the most
stringent measure of liquidity, it is rarely used. Companies will not keep excessive amounts of
cash on hand because it would be an indication of poor asset utilization (Investopedia, 2015).
Cash Ratio 2011 2012 2013 2014 2015
Starbucks 0.5531 0.5379 0.221 0.5622 0.4188
Dunkin' Donuts 0.7794 0.7146 0.7462 0.5853 0.9969
Krispy Kreme 0.54 1.07 1.42 1.2 1.02
Asset Management. Asset management is a systematic process of operating, maintaining, and
upgrading assets to maximize revenue generation. Ratios vary by industry, and higher ratios are
better. SBUX outperforms DNKN and KK in every asset management metric, (except inventory
turnover which can be attributed to the sale of Coffee Mugs, Verismo machines and other

merchandise items that DNKN and KK don’t offer), meaning Starbucks is more efficient in
using its assets to generate sales and revenue than its competitors, which the ROA table below
clearly illustrates. Additionally, SBUX has been able to improve its performance ratios over the
past five years by its continuing focus on cash flow management, closing underperforming stores
(Banham, 2011) and using data analytics to optimize new store siting to maximize traffic and
profitability (Thau, 2014).
Return on Assets(ROA) 2011 2012 2013 2014 2015
Starbucks 13.90% 14.30% 14.00% 15.70% 18.10%
Dunkin' Donuts 4.10% 4.90% 5.40% 6.20% 6.90%
Krispy Kreme 7.20% 6.50% 7.00% 8.80% 9.80%
Total Asset Turnover 2011 2012 2013 2014 2015
Starbucks 1.7 1.7 1.5 1.5 1.7
Dunkin' Donuts 0.2 0.2 0.2 0.2 0.2
Krispy Kreme 2.2 1.6 1.3 1.4 1.4
FixedAssetTurnover 2011 2012 2013 2014 2015
Starbucks 4.9 5.3 5.1 4.9 5
Dunkin' Donuts 2.9 3.3 3.6 3.9 4.1
Krispy Kreme 5 5.5 5.7 5.4 4.7
Accounts Rec Turnover 2011 2012 2013 2014 2015
Starbucks 34 30.4 28.4 27.6 28.4
Dunkin' Donuts 16.2 16.7 18.2 17.3 13.9
Krispy Kreme 20 18.3 17.6 18.7 19.1
InventoryTurnover 2011 2012 2013 2014 2015
Starbucks 11.3 8.8 9.1 10.4 11
Dunkin' Donuts n/a n/a n/a n/a n/a
Krispy Kreme 21.7 25.4 29 25.8 22.9
Debt Management.
“Of the 11 consumer-discretionary companies in the S&P 500 with market values bigger
than $50 billion, Starbucks has the least debt, trailing the borrowing levels of businesses

including McDonald's and Nike. Those two have sold a combined $1.5 billion of dollar-
denominated bonds this year, Bloomberg data shows Starbucks could add that amount of
debt ‘and still have credit metrics and growth prospects that are better than McDonald's,’
which is ranked A by S&P, said Joel Levington, managing director of corporate credit
research at Brookfield Investment Management in New York” (Mead, 2013, para 11).
DNKN and KK have market valuations far below $50 billion, however they also manage their
debt effectively with low Total Debt, Debt-Equity Ratios and Equity Multipliers. DNKN,
however, has been far more aggressive in its use of debt than either SBUX or KK—which also
have much greater cash flow than DNKN. Perhaps DNKN’s debt level and tax shield advantage
over financial distress costs is still advantageous. However, DNKN refinanced its debt in
January, 2015. According to DNKN, “The new debt structure leverages our business model's
ability to generate strong cash flow and increases our financial flexibility,” (Dunkin’ Brands,
2015, para 5) and further allows DNKN to repurchase stock and return earnings to its investors
(Dunkin’ Brands, 2015).
Total Debt Ratio 2011 2012 2013 2014 2015
Starbucks 0.403932 0.377737 0.6108 0.509556 0.5324
Dunkin' Donuts 0.768641 0.891228 0.872538 0.881979 n/a
Krispy Kreme 0.550324 0.256196 0.279321 0.216839 0.240714
Debt-EquityRatio 2011 2012 2013 2014 2015
Starbucks 0.125316 0.107575 0.274407 0.388524 0.40966
Dunkin' Donuts 3.322295 8.192857 6.845501 7.473067 n/a
Krispy Kreme 1.223822 0.34444 0.387581 0.277254 0.317028
Of particular note is SBUX’s Equity Multiplier (EM), which links ROA and ROE, and which
also increased in 2013 as SBUX refinanced its previous bond issue. This indicates that SBUX
may be more willing to issue long term debt to support its growing asset base. Still, the EM
remains very low, especially in comparison to DNKN. One possible explanation is SBUX’s great
profitability, high net income and retained earnings. This source of internally generated funds
means SBUX does not need to pursue heavy debt financing (Hevert, 2013). Similarly, KK,

generates enormous amounts of cash. KK’s EM is approaching the level of SBUX prior to the
2013 debt issue. But with lower debt, KK has exceeded SBUX’s Cash Coverage and Times
Interest Earned levels in 2015.
Equity Multiplier(EM) 2011 2012 2013 2014 2015
Starbucks 1.677661 1.607039 2.569373 2.038967 2.138579
Dunkin' Donuts 4.322295 9.192857 7.845501 8.473067 n/a
Krispy Kreme 2.223822 1.34444 1.387581 1.277254 1.317028
TimesInterestEarned 2011 2012 2013 2014 2015
Starbucks 45.84985 54.77676 78.82562 43.70203 48.41135
Dunkin' Donuts 2.019157 3.429131 3.492481 4.690265 n/a
Krispy Kreme 2.704225 15.52941 23.75 31.93333 55.11111
Cash Coverage 2011 2012 2013 2014 2015
Starbucks 108.1502 127.1713 180.7082 98.94384 109.3589
Dunkin' Donuts 4.542146 7.561905 7.602757 10.0531 n/a
Krispy Kreme 6.450704 35.88235 53.6875 71.33333 124.5556
Profitability. In terms of profitability, all three companies really stand out as they all outperform
their competitors and far exceed industry averages. 2013 was an uncharacteristic year for SBUX
due to its negative operating margin, tiny net margin of 0.1% and 0.2% ROE. Fortunately SBUX
rebounded stronger than ever in all three categories in 2014 and trails only DNKN in terms of
profitability.
Operating Margin is one of the most important margin ratios for Starbucks. “It provides
more comparability against competitors whose reliance on borrowing to finance operations
varies. Also, operating margin is indicative of the company's effectiveness from the standpoint of
creditors and equity shareholders. As of June 28, 2015, Starbucks' operating margin stands at
18.9%, which is much higher when compared to the operating margin of 5% for the restaurant
and bars industry” (Blokhin, 2015, para 5).

OperatingMargin 2011 2012 2013 2014 2015
Starbucks 14.8% 15.0% -2.2% 18.7% 18.8%
Dunkin' Donuts 31.68% 33.56% 38.29% 39.04% 53.83%
Krispy Kreme 5.30% 6.55% 8.72% 10.30% 10.18%
“Net margin is another crucial metric for Starbucks, as it shows the company's effectiveness in
covering operating costs, financing and tax expenses. Unlike the operating margin, the net
margin shows Starbucks' financial effectiveness from the perspective of its common equity
shareholders only. As of June 28, 2015, Starbucks' net margin was 14.6%, which is significantly
higher than the industry's average of 3.2%” (Blokhin, 2015, para 6).
NetMargin 2011 2012 2013 2014 2015
Starbucks 10.6% 10.4% 0.1% 12.6% 14.4%
Dunkin' Donuts 5.50% 16.50% 20.60% 23.60% 20.80%
Krispy Kreme 2.10% 41.20% 4.80% 7.40% 6.10%
ROE “reveals how much income the company has generated with funds provided by its equity
shareholders. Firms with strong economic moats typically have higher ROE compared to rivals.
As of June 28, 2015, Starbucks' ROE stands at 49.3%, which is significantly higher than its
competitors' average return of 10.7% (Blokhin, 2015, para 7).
Return on Equity (ROE) 2011 2012 2013 2014 2015
Starbucks 30.9% 29.1% 0.2% 42.4% 49.7%
Dunkin' Donuts 6.50% 19.60% 38.40% 44.60% 115.30%
Krispy Kreme 10.90% 102.10% 8.40% 13.40% 11.30%
Market. “Wall Street is clearly excited about the financial implications of Starbucks'
growth strategy. Besides the optimistic signal being sent by a record stock price, the retailer also
just received glowing praise from Moody's, the debt-rating agency. While upgrading its bond
rating, Moody's highlighted Starbucks' ‘strong and consistent operating trends driven by new
product offerings, greater day part diversity, well accepted loyalty program and e-commerce
initiatives that have resulted in strong credit metrics and excellent liquidity.’ The research service

said its confidence was boosted by the retailer's ‘global brand strength, dominant position in the
U.S. specialty coffee segment, global diversification, significant scale, and balanced financial
policy’ (Kalogeropolous, 2015, para 7). Of the three companies over the last five years, only
SBUX has outperformed the S&P 500 without any dips below the index while both DNKN and
KK have gone up and down. Especially in the second half of 2015, DNKN and KK have dipped
below the index while SBUX’s growth has greatly increased. This is reflected in Starbucks’
greater Enterprise Value growth and EV Multiple.
Market Capitalization 2011 2012 2013 2014 2015
Starbucks 31296.5 37210.24 60662.73 59364.36 90695.06
Dunkin' Donuts 3491.79 3937.371 5384.366 4884.82 4004.8
Krispy Kreme 475.2 497.13 916.908 1135.75 1298.649
Enterprise Value (EV) 2011 2012 2013 2014 2015
Starbucks 32218.9 38277.94 64463.33 62999.76 95709.96
Dunkin' Donuts 5723.19 6552.271 7949.866 7477.42 6176.9
Krispy Kreme 488.6 480.43 876.308 1082.05 1257.349
Enterprise Value Multiples 2011 2012 2013 2014 2015
Starbucks 15.53017 16.16945 22.51679 17.79152 22.27471
Dunkin' Donuts 21.72813 21.56771 24.2374 20.56496 14.76
Krispy Kreme 18.36842 13.88526 18.29453 18.3088 20.11758
Starbucks and DNKN are also providing excellent Earnings Per Share (EPS), but DNKN
is doing it with far less equity than Starbucks, hence DNKN is comparatively better than SBUX
at creating earnings from equity.
Earnings Per Share (EPS) 2011 2012 2013 2014 2015
Starbucks 0.836265 0.923395 0.00551 1.379561 1.85671
Dunkin' Donuts 0.287866 1.020735 1.378049 1.686424 1.66
Krispy Kreme 0.112593 2.441997 0.318043 0.528505 0.46379
However, Starbucks has increased its EPS with a rising stock price while DNKN’s stock price
has fallen considerably from a mid-2015 peak. KK, on the other hand, is far less adept at

generating earnings than either DKN or SBUX.
Price-EarningsRatio (PE) 2011 2012 2013 2014 2015
Starbucks 25.31325 26.98913 4027 28.90511 32.89151
Dunkin' Donuts 101.5055 36.35615 36.65327 27.69172 25.90361446
Krispy Kreme 64 3.041667 45.22581 34.31373 44.46667
Market to Book Ratio 2011 2012 2013 2014 2015
Starbucks 7.146259 7.281525 13.55892 11.25 15.57908
Dunkin' Donuts 4.682692 11.34862 13.22251 13.26705 n/a
Krispy Kreme 6.230088 1.994536 3.718833 4.289216 4.856796
Buy Sell Decision.
“Starbucks, which generates more free cash relative to its debt than any U.S. restaurant
chain, may more than double borrowings to reward shareholders without hurting its
credit. The company is "in the early innings of a global expansion that may last for
decades" and is poised to benefit from lower coffee costs and higher-margin food
offerings, Goldman Sachs equity analysts led by Michael Kelter said in a July 26 report.”
(Mead, 2013, par 1, 14).
“Wall Street is clearly excited about the financial implications of Starbucks' growth
strategy. Besides the optimistic signal being sent by a record stock price, the retailer also just
received glowing praise from Moody's. While upgrading its bond rating, Moody's highlighted
Starbucks' "strong and consistent operating trends driven by new product offerings, greater day
part diversity, well accepted loyalty program and e-commerce initiatives that have resulted in
strong credit metrics and excellent liquidity." [Moody’s] said its confidence was boosted by the
retailer's "global brand strength, dominant position in the U.S. specialty coffee segment, global
diversification, significant scale, and balanced financial policy" (Kalogeropolous, 2015, para 7).
SBUX isn’t just an industry or market leader, SBUX is a cash generating machine. Every
aspect of this analysis should ultimately lead to a buy decision. In addition to the
macroeconomic analysis, SWOT analysis and ratio analysis, SBUX is also a great addition to
any portfolio for diversification and as a hedge against higher risk stocks with its five year beta

average of .75 (S&P Capital IQ, 2015). One major consideration though is that SBUX does not
pay dividends. So if earning dividends is important, one may not want to buy SBUX. However,
SBUX does return cash to shareholders through stock repurchases—which have helped fuel the
stock price increases in 2015 while its competitors’ stock values have declined. A second major
consideration is valuation. As SBUX stock has greatly increased in value in 2015, one must
consider if the stock is overvalued, as Kalogeropolous concurs:
“The biggest risk for investors looking to buy a piece of such a high-performing business
is in paying too much. And Starbucks has grown more expensive lately -- no matter
which way you look at the stock. It's valued at 33 times trailing earnings, up from 25
times at the beginning of this year. Investors are also paying nearly five times sales to
own shares. That figure was as low as 0.5 times sales at the bottom of the financial crisis,
and hasn't been this high in more than a decade (Kalogeropolous, 2015, paras 9-10).
If dividends are not paid by Starbucks and earnings come from price increase and stock
repurchases, concern about the stock price being valued too high is a legitimate concern.
However, other important metrics and ratios are also at record highs.
“Operating income soared 22% higher last quarter as profit margin expanded by almost a
full percentage point to hit 19.2% of sales. While the beverage giant is expensive right
now, it’s not absurdly so. And in light of the market-thumping business trends and
broadly improving finances, I think investors have a decent chance of getting a good
long-term return even from today’s prices. There’s no telling which direction the stock
will go during the next year. But Starbucks is one of the world’s most valuable brands,
and its operations are growing more diverse even as they improve on the core coffee
experience. In my view, that all adds up to a stock that’s worth the spicy premium”
(Kalogeropolous, 2015, paras 11-13).
That sums up why SBUX is a must BUY: as the Chinese are discovering, it’s the experience that
everyone values so highly. That is why Starbucks commands premium prices for its products,
and why its continued growth and profitability prospects are bright.

Appendix A: Starbucks Products
(1) Starbucks Products
a. Starbucks offers a range of exceptional products that customers enjoy in our
stores, at home, and on the go.
b. Coffee: More than 30 blends and single-origin premium coffees.
c. Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages,
Frappuccino® coffee and non-coffee blended beverages, Starbucks Refreshers®
beverages, smoothies and teas.
d. Merchandise: Coffee- and tea-brewing equipment, Verismo® System by
Starbucks, mugs and accessories, packaged goods, books and gifts.
e. Fresh Food: Baked pastries, sandwiches, salads, salad and grain bowls, oatmeal,
yogurt parfaits and fruit cups.
(2) Consumer Products
a. Coffee and Tea: Whole bean and ground coffee (Starbucks and Seattle’s Best
Coffee brands), Starbucks VIA® Instant, Starbucks® Coffee K-Cup® pods,
Starbucks® and Teavana® Verismo® pods, Tazo® tea filterbags, and Tazo ® tea
latte concentrates.
b. Ready-to-Drink (RTD): Starbucks® bottled Frappuccino® coffee drinks,
Starbucks Discoveries® chilled cup coffees, Starbucks Discoveries Iced Café
Favorites®, Starbucks Iced Coffee, Starbucks Doubleshot® espresso drinks,
Starbucks Doubleshot® Energy Coffee drinks; Starbucks Refreshers® beverages,
Evolution Fresh™ bottled juices, Tazo® bottled iced and juiced teas.
(3) Brand Portfolio
a. Starbucks Coffee, Seattle’s Best Coffee, Teavana, Tazo, Evolution Fresh, La
Boulange, Ethos Water and Torrefazione Italia Coffee.

Appendix B: Starbucks SevenStrategies for Growth
Matt Ryan – Starbucks Global Chief Strategy Officer outlines the company’s seven growth
strategies as follows:
1. Be the Employer of Choice – Invest in partners capable of delivering a superior customer
experience.
2. Lead in Coffee – Continue to build our leadership position around coffee agronomy,
sourcing, roasting, brewing and serving handcrafted beverages.
3. Grow the Store Portfolio – Increase the scale of the Starbucks store footprint with
disciplined expansion. (Different formats, licensing opportunities and international
expansion)
4. Create New Occasions to Visit Stores – Grow store usage across day parts with new
product offers. In addition to breakfast, create new food offerings for lunch, afternoon
refreshment and snacks, and evenings.
5. CPG Brand Growth – Focus on the Starbucks brand to unlock profitable growth rarely
seen in consumer packaged goods internationally.
6. Build Teavana – Create a second major business in tea. The global tea market is about a
$109 billion dollar industry. (Emphasis on Tea Bars, relevant tea products and formats,
Teavana in Starbucks, and Teavana in the grocery aisle)
7. Extend Digital Engagement – Drive convenience and brand engagement through mobile
commerce platforms. This includes expanding the number of customers participating in
My Starbucks Rewards, and launching Mobile Order & Pay and Delivery. (1 in 8
Americans received a Starbucks gift card for Christmas)
("Starbucks Details Five-Year Plan to Accelerate Profitable Growth at Investor
Conference | Starbucks Newsroom," 2014)

Appendix C: Starbucks Executive Leadership
Howard Schultz, Chief Executive Officer
Howard Schultz has been the chief executive officer and president of the company since its
inception in 1985. Schultz, Howard D., the Founder, Chairman and Chief Executive Officer, has
not just made a name for his brand, but also himself. He embodies the values of Starbucks and its
pledge to create a third place (i.e., home, work, Starbucks) for patrons to sit, sip, socialize, etc.
He has earned the respect of his peers, his employees, his customers, etc., through his strict
adherence to corporate ethics to produce a genial and productive corporate culture. He has had
the advantage of learning the coffee shop market first hand, that his company has popularized in
the United States, operates. He has had the financial information surrounding business
operations for almost 3 decades, including seeing first hand which stores close, underperform or
shine. He is probably the best educated coffee shop business analyst in the country. Although
the rest of the top management team are made up of newcomers, Schultz appears to run the show
- exercising strategic control in all areas of Starbucks operations. This is evident from the
mission statement to the decisions he makes about finance, store openings, advertising, personnel
policies etc (S&P Capital IQ, 2015).
Scott Harlan Maw, Chief Financial Officer and Executive Vice President
Scott Harlan Maw is a strength. Having been promoted from within the company, Maw’s
understanding of the company, its operations and its finances has led to outstanding stock
performance. “The Company shares has received a rating of Buy from 11 Wall Street Analysts. 4
analysts have rated Hold.1 analyst have also rated it as a Underperform. Starbucks Corporation
(NASDAQ:SBUX): The mean short term price target for Starbucks Corporation
(NASDAQ:SBUX) has been established at $63.45 per share. The higher price target estimate is
at $98 and the lower price target estimate is expected at $52 according to 20 Analyst. The stock
price is expected to vary based on the estimate which is suggested by the standard deviation
value of $9.52” (Smith, 2015, para 2).
Sharon L. Rothstein, Global Chief Marketing Officer
Sharon Rothstein is Starbucks global chief marketing officer, and she is also a great strength. In
this role, Sharon leads the creation of the brand narrative for Starbucks retail and channel
development, marketing initiatives, creative expressions, advertising, and key business
partnerships. She also has direct responsibility for leading Starbucks global creative studio,
global digital marketing team and global category brand management. Additionally, Sharon co-
chairs the Starbucks global brand leadership team and is responsible for amplifying and
integrating the Starbucks brand and customer experience through the company’s rapidly
expanding digital and loyalty platforms. It’s the loyalty platforms, such as the gold card and
mobile app that have generated 35% of the company’s sales and provide the company with cash
upfront as gift card, gold card, and app generated sales are from front-loaded payment vehicles
(Matherson, 2013).

Curtis Evander Garner III, Chief Information Officer and Executive Vice President
Mr. Garner, known as Curt, began his career at Starbucks March 9, 2012. Curt currently heads
Starbucks global technology and engineering services inclusive of all businesses and operating
organizations across all Starbucks channels and geographies (https://www.linkedin.com/in/curt-
garner-6894764). He also functions as Senior Vice President of Business Technology and
supports retail and international technology at Starbucks. Curt is a graduate of the Ohio State
University; B.A. Economics (S&P Capital IQ, 2015)
Scott Pitasky, Executive Vice President and Chief Partner (human) resources Officer.
Scott began his career at Starbucks in October of 2014. In addition to his current role, Scott has
had many years of Executive level experience is some of America’s most profitable, well known
corporations (most notably Microsoft and Amazon. Scott is a graduate from the Wharton School
of the University of Pennsylvania; B.S. Finance and Management (S&P Capital IQ, 2015)
The presence of Curtis E. Garner III and Scott Pitasky in executive leadership roles can be seen
as strengths to the Starbucks organization. Both bring very strong technical skills and expertise
to the company. Curtis currently also serves as a director of Aerohive Networks, Inc and has
more than 20 years of IT experience. His resume also includes various technology related
leadership roles when he was employed by Wendy’s International. Scott has held high level
management positions with two of the most well know, fastest growing technology firms in
America; Amazon and Microsoft. (S&P Capital IQ, 2015).
Brotman, Adam B., the Chief Digital Officer, is responsible for the Starbucks mobile
application and digital strategies. The Starbucks’ mobile application has revolutionized payments
and made the Starbucks experience more accessible, at the touch of a button. Because mobile
app purchases are prepaid through gift card or loyalty card reloads, Brotman’s technological
expertise and his collaboration with Sharon Rothstein have created a full third of Starbuck’s
exceptional cash flow (Elgan, 2014).
Ms. Gerri Martin-Flickinger is Chief Technology Officer of Starbucks. She has been in
position since November 2nd, 2015. Although new to the leadership team at Starbucks, she has a
wealth of experience to offer. Previously she had been the Chief Information Officer and Senior
Vice President of Adobe Systems Incorporated since May 15, 2007 until October 12th 2015, a
very reputatble company. Her expertise has been said to include a leading transformational
change, aligning IT costs, and brokering business and IT relations (S&P Capital IQ, 2015).
Jinlong Wang has been the Vice President of Business Development in Starbucks China for
the past 2 years. He has had a long running career within the Starbucks corporation as he has
been here since 2005 (S&P Capital IQ, 2015).
Helm, Lucy Lee, the Executive Vice President, General Counsel and Secretary, handles
legal and corporate affairs (S&P Capital IQ, 2015).

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