Starbucks Corporation 10-K Summary
Business Context and Reporting Period
This Annual Report on Form 10-K covers the fiscal year ended October 3, 1999. Starbucks Corporation operates as a leading retailer of high-quality whole bean coffees, espresso beverages, and related products. The company's strategy focuses on rapid expansion of company-operated retail stores, growth in specialty operations (wholesale, licensing, and joint ventures), and brand extension through new products and distribution channels.
Key Financial Metrics and Operational Data
Note: Specific revenue, profit, cash flow, and margin figures are incorporated by reference to the 1999 Annual Report to Shareholders and are not explicitly detailed in the provided text.
- Store Count: 2,135 company-operated stores as of October 3, 1999 (34 U.S. states, D.C., 5 Canadian provinces, U.K.).
- Revenue Mix: Company-operated retail stores accounted for approximately 85% of net revenues; specialty operations accounted for 15%.
- Product Mix (Retail): 69% handcrafted beverages, 15% food items, 10% whole bean coffees, 6% equipment/accessories.
- Debt and Commitments: The company assumed loans totaling approximately $7.7 million upon purchasing the York Plant. Fixed-price purchase commitments for green coffee totaled approximately $84 million.
- Market Capitalization: Aggregate market value of voting stock held by non-affiliates was $4.73 billion (as of December 1, 1999).
- Employees: Approximately 37,000 individuals (34,000 in retail/regional offices).
Material Changes and Expansion
During fiscal 1999, Starbucks executed significant expansion and acquisition integration:
- New Store Openings: Opened 460 new company-operated stores.
- Acquisitions: Converted 56 stores acquired from Seattle Coffee Holdings Limited and 26 stores acquired from Pasqua Inc. to the Starbucks brand.
- International Growth: Opened 121 new stores outside North America and the U.K., entering markets in China, Malaysia, South Korea, New Zealand, and Kuwait.
- Real Estate: Purchased a 365,000 square foot roasting and distribution facility in York County, Pennsylvania, previously leased.
- Product Distribution: Frappuccino distribution expanded to approximately 200,000 locations; grocery channel distribution reached 8,500 supermarkets in 15 states.
Outlook, Risks, and Management Commentary
Guidance and Outlook: Management plans to continue rapid expansion of retail operations and specialty channels. The company expects to achieve national grocery distribution by the middle of fiscal 2000. Growth is intended to be financed through cash flow from operations, supplemented by debt if necessary.
Risks and Contingencies:
- Commodity Volatility: Coffee supply and prices are subject to significant volatility due to weather, political conditions, and export quotas. The company uses fixed-price commitments and futures contracts to hedge, though success is not guaranteed.
- Competition: Intense competition exists in specialty coffee, supermarkets, and for retail site selection. A major competitor with greater resources could enter the market.
- Seasonality: Significant revenues and profits are realized in the first fiscal quarter (December holiday season).
- Legal: No material legal proceedings are currently pending that would adversely affect financial position.
Investor Verification Checklist
- Verify the specific revenue, net income, and cash flow figures in the 1999 Annual Report to Shareholders, as they are incorporated by reference and not listed in this text.
- Confirm the status of the $84 million in fixed-price coffee purchase commitments and their impact on future cost of goods sold.
- Review the Proxy Statement for details on executive compensation and beneficial ownership.
- Assess the progress of the Kraft Foods licensing agreement toward national grocery distribution.
- Monitor the integration of the York Plant and the associated $7.7 million debt assumption.