Starbucks Coffee EMEA

The Starbucks Story

Today’s Agenda Today’s Agenda

Our History & Building of the Brand.

Our Values

Our Numbers and Our Goals.

Our Partners and Partnerships

The Future

A brief history ...A brief history ...

The story begins in The story begins in 19711971

Howard Schultz arrives Howard Schultz arrives 19821982

A trip to Italy changes StarbucksA trip to Italy changes Starbucks

Starbucks goes public June Starbucks goes public June 1992 1992 ((165165 stores)stores)

Starbucks opens in Japan Starbucks opens in Japan 1996 1996 ((10061006 Stores)Stores)

Our Values and Our BrandOur Values and Our BrandThe following six guiding principles will help us measure The following six guiding principles will help us measure

the appropriateness of our decisions:the appropriateness of our decisions: Provide a great work environment and treat each Provide a great work environment and treat each

other with other with respectrespect and and dignitydignity. . Embrace Embrace diversitydiversity as an essential component in the as an essential component in the

way we do business. way we do business. Apply the Apply the highesthighest standards of excellence to the standards of excellence to the

purchasing, roasting and fresh deliverypurchasing, roasting and fresh delivery of our of our coffeecoffee. .

Develop Develop enthusiasticallyenthusiastically satisfied customers all of satisfied customers all of the time. the time.

Contribute positively to our Contribute positively to our communitiescommunities and our and our environment. environment.

Recognize that Recognize that profitabilityprofitability is essential to our is essential to our future success. future success.

Brand Essence“Who We Are”

ComfortFamiliarityAuthenticity

SurpriseDiscoveryInspiration

The third place experience

Starbucks …

Starbucks …

Passion

Coffee People•Quality

•Innovation•Personalization and Choice

•Knowledge/Expertise

•Uncompromising Standards•Attention to detail•Everything matters

•Service•Community

•Personal Connections•Employer of Choice

Source: Starbucks Internal Audit.

An ExpandingAn ExpandingGlobal BrandGlobal Brand

Leading specialty coffee brand & retailerin the world

5,000+ stores worldwide serving approximately 18 million customers a week.

Presence in 26 countries with 1,000+ stores outside of North America

Enormous retail expansion opportunity worldwide Tremendous worldwide brand expansion potential

An Expanding Global BrandAn Expanding Global Brand

Coffee Coffee -- roast, retail and wholesaleroast, retail and wholesale RetailRetail-- our core business our core business Ice Cream Ice Cream -- No.No.1 1 coffee ice cream in UScoffee ice cream in US Frappuccino Frappuccino -- No.No.1 1 prepared coffee drink in USprepared coffee drink in US MerchandiseMerchandiseBrewing, mugs, books, coffee/tea wareBrewing, mugs, books, coffee/tea wareCDs CDs Starbucks chocolateStarbucks chocolateTazo TeaTazo Tea

What we do ...What we do ...

Focus on People,Focus on People,Experience and ProductExperience and Product

Where We Where We Are TodayAre Today

TodayToday

Category leader with a very strong& still improving image

One of 75 Great Global Brandsin the 21st Century

2nd year as America’s Most Admired Company In Food Service Category

Among 100 Strongest Global Brands

Today…Dedicated to sourcing

the highest quality coffee in the world

Today…

4th year as one of

“The 100 Best Companies toWork For”

Loyal partners create the experiencethat creates loyal customers

Business practices that contribute positively to our communities & environment

Among 100 BestCorporate Citizens

Component of Dow Jones Sustainability World Index

Today…

Today…

Today…Starbucks partner volunteeringat United Way’s Day of Caring

Commitment to origin coffee growing regions

What do we mean by Commitment to Origins?

‘Starbucks aspires to be recognised as much for our commitment to social responsibility as we are for the quality of our coffee. We will do this through focusing our efforts on improving social and economic conditions for coffee farmers; minimising our environmental impact; making a positive contribution in the communities where we do business; and providing a great work environment for our partners.’

Orin Smith, 2001

Specific Elements of Commitment to Origins

Unique Coffee Selections:• Fair Trade Coffee• Shade Grown Coffee• Organic Coffee

… AND…

Corporate Social Responsibility:• Commitment to Coffee Farmers• Commitment to the Environment• Commitment to Local Community

Fair TradeHow Fair Trade helps farmers: Over half of the world's coffee is produced on smallfamily farms with only a few acres of coffee trees. Fair Trade certification provides a wayfor these farmers to increase their incomes by helping them organize into cooperativesand linking them directly to coffee importers. Fair trade farmers are guaranteed apremium over the prevailing price being paid for coffee on the international market. Thishelps them afford basic healthcare, education and housing improvements for theirfamilies and farms. In addition, Fair Trade improves farmers' economic stability byencouraging importers to extend financial credit to cooperatives and to develop long-term trading relationships.

About Starbucks and Fair Trade: Starbucks is committed to sourcing coffees of thehighest quality that support a sustainable social, ecological and economic model forproduction and trade. In April 2000, Starbucks formed an alliance with TransFair USAthat provides an additional opportunity for us and our customers to have a meaningfulimpact on the working and living conditions faced by many who grow, harvest andprocess coffee throughout the world.

Organic Coffee

EcoLogica, an organic certification organization in South America, provided the certification to the coffee farm that produced Starbucks first certified 100% organically grown coffee, Organic Costa Rica, in 1999.Official certification requires that farms submit to three years of soil testing followed by annual testing to retain certification as organic producers. Once harvested, the coffee beans must be processed in organically certified mills and roasting facilities in order to be sold as organic.

Organic coffee is grown without synthetic pesticides, herbicides or fertilizers. This procedure helps maintain a healthy environment and clean ground water.Many farmers have traditionally employed organic growing methods passed down from one generation to another. In fact many of the coffees that Starbucks buys are grown using organic methods, although most are not identified as such. Coffee grown organically, but not certified is sometimes called ‘passive organic.’

Organic Shade Grown Mexico

• The wave of growth in coffee houses has raised with it the issue of the plight of coffee growing nations especially Southern Mexico

• Organic coffee is available in grocery stores and markets across the region, but not widely available in coffee shops, and is a small but rapidly growing segment within speciality coffee (c. 3% of whole bean sales, however there is 25% growth per year in this category).

Corporate Social Responsibility

• Starbucks commitment to “contribute positively to our communities and our environment” is a key guiding principle in the Company’s mission statement.

• Starbucks strives to become a great, enduring company by championing business practices that produce social, environmental, and economic benefits for Starbucks communities around the world.

•

Commitment to Farmers• Starbucks commitment to coffee origin

countries includes addressing social and environmental issues in order to help sustain the people and places that produce our coffees.

• Starbucks purchases coffee directly from farms, paying high premiums for the coffee, working closely with the producers on quality, and encouraging participation in social programs for health and education.

• Purchases of organic, shade grown and fair trade coffees by Starbucks all contribute to greater social, economic and environmental sustainability of coffee production.

Humanitarian Support• Starbucks has contributed more

than $1.5 million to CARE, the international development and relief organization.

• CARE focuses on long-term support for literacy and education programs in the coffee-growing regions of Indonesia, Ethiopia, Kenya and Guatemala.

• In addition, Starbucks frequently provides emergency relief aid to disaster victims in coffee origin countries.

Origin Country Initiatives

For example, Starbucks alliance with Grants to Enterprise Works Worldwide helped farmers build two coffee processing facilities in Guatemala, enabling a cooperative of 700 farm families to improve their economic situation by milling their own coffees.

Starbucks makes many long-term investments in coffee origin countries, such as building schools, health clinics, and coffee processing facilities to improve the well being of families in coffee farming communities.

Commitment to the Environment

Starbucks Environmental Mission Statement:

Starbucks is committed to a role of environmental leadership in all facets of our

Environmental InitiativesStarbucks will fulfill our Commitment to the Environment

through:

• Support of Conservation International programs• Starbucks Green Team (Environmental management

team)– Instill environmental responsibility as a corporate value– Striving to buy, sell and use environmentally friendly

products in all operations– Minimising the environmental impacts of materials,

manufacturing processes and distribution systems• Reduce, Re-use, Recycle Program

– Program employed or being developed in all stores and company facilities

– Starbucks recycles used coffee grounds and burlap bags used to ship green coffee

– Encouraging customer use of re-usable serveware• Green Sweeps Program ( Cleanups by staff)

Commitment to Community

Starbucks recognises the importance of community and the role which we play and provides support through donations, partner volunteerism, strategic partnerships and giving programs.

The Make Your Mark in the US program encourages volunteerism of employees in local communities, likewise within EMEA, many of our partners are involved in local community-related activities. Employee-led initiatives focus on physical improvements to neighbourhoods, tutoring, and assistance with sick children, in soup kitchens for the homeless, among many others.

International International HistoryHistory

From a small start in 1996 …

Japan

0 2

1995 1996 1997 1998 1999 2000

Stores

FY 1997 …

Japan

Hawaii Singapore

0 2 17

1995 1996 1997 1998 1999 2000

Stores

FY 1998 …

Japan

Hawaii Singapore Philippines

TaiwanThailand

UK

0 2 17

1995 1996 1997 1998 1999 2000

128

Stores

FY 1999 …

Japan

Hawaii Singapore Philippines

TaiwanThailand

UK

NewZealand

Malaysia

ChinaKoreaKuwait

0 2 17

1995 1996 1997 1998 1999 2000

128

278

Stores

FY 2000 …

Japan

Hawaii Singapore Philippines

TaiwanThailand

UK

NewZealand

Malaysia

ChinaKoreaKuwait

Australia

Lebanon

UAEQatar

0 2 17

524

1995 1996 1997 1998 1999 2000

128

278

Stores

FY 2001 …

0 2 17

524

1995 1996 1997 1998 1999 2000

128

278

2001

StoresStores

By this Morning..

1155 international stores open in 26international markets

Exceeding expectations in virtually all markets

Opening stores at an annualized rate of over 400 new stores in the international division

Today

745

75

335

Europe

MiddleEast

AsiaPacific

North America

4270

1155 International Stores

26 Markets

Where Where We Are We Are GoingGoing

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Net RevenuesNet Revenues$$22,,649649

$$698698$$975975

$$11,,309309

$$11,,687687

$$22,,178178

1996

(In Millions)

(5 Year CAGR=31%)

*Fiscal Year 1999 includes 53 weeks versus 52 weeks for all other years

1997 1998 1999* 2000 2001

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Global Retail Store GrowthGlobal Retail Store Growth

11,,01501511,,412412

11,,88688622,,498498

33,,501501

1996 1997 1998 1999 2000

(5 Year CAGR=36%)

Company-operated

2001

44,,709709

Licensed

3131%%

6969%%

Comparable Store SalesComparable Store Sales

2

3

4

5

6

7

8

9

10 99%%

55%%66%%

55%%55%%

77%%

1996 1997 1998 1999 2000 2001

Earnings Per ShareEarnings Per Share

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

$0.40

$0.45

$0.50

$$00..1717$$00..2222

$$00..2727$$00..3535

Excluding one-time charges*Fiscal Year 1999 includes 53 weeks versus 52 weeks for all other years

1996 1997 1998 1999* 2000

(5 Year CAGR=29%)$$00..4646

2001

$$00..1313

Our PartnersOur Partners

Starbucks

PartnersGreater Equity Over Time

International Ownership Strategy

Demonstrate concept, establish

credibility

100%Starbucks

Leverage partner’s expertise, maintain

influence

50/50JV

Gain board seat, minimize P&L

impact

<20%JV

Move quickly, minimize risks

StraightLicense

(2)

(1)

0

1

2

3

4

5

Year 1 Year 2 Year 3 Year 4 Year 5

Ope

ratin

g Pr

ofit

($ M

illio

ns)

Licensed (0%) JV (50%) Owned (100%)

Example market with 3 ownership assumptions

• Years 1 to 3: Minimize P&L impact of start-up losses

• Year 5: Opportunity to capture earnings through contractual buy-in provisions

Programs

International Ownership Strategy

Our Partners and Partnerships

Shared values and corporate cultureDedicated human resourcesStrong multi-unit retail/restaurant experienceCommitment to customer serviceQuality imageCreative ability, local knowledge and brand-building skills Strong financial resources

Choosing the right partners is critical to our success

Programs

Increasing Competitive Threats• Growth: Develop New Markets

A quick World Tour …

Sydney, AustraliaSydney, Australia

Canberra, AustraliaCanberra, Australia

Auckland, New ZealandAuckland, New Zealand

Shanghai, ChinaShanghai, China

Beijing, ChinaBeijing, China

PhilippinesPhilippines

Beirut, LebanonBeirut, Lebanon

Palm Strip store in DubaiPalm Strip store in Dubai

Kuwait CityKuwait City

Edinburgh, ScotlandEdinburgh, Scotland

Shibuya, JapanShibuya, Japan

Worlds highestWorlds highestvolume Starbucksvolume Starbucks

Shibuya, JapanShibuya, Japan

A glimpse of ourA glimpse of ourfuture...future...

The Potential in Europe:

1450

990

750

725

360

300

140

140

370

0 500 1000 1500 2000

Germany

France

UK

Spain

Italy

Benelux

Scandinavia

Switzerland

Austria

5,225Potential

Stores

Europe

• International Store Growth )’02 to ‘07

‘02361

‘0287

11,,350 350 International Stores by FYE International Stores by FYE 020255,,182 182 International Stores by FYE International Stores by FYE 0707

‘071,821

‘07316

‘07430

‘072,615

‘02865

‘0237

Latin America (incl. Puerto Rico & Hawaii)

Europe

Middle East/AfricaAsia-Pacific

…and the Rest of the World:…and the Rest of the World:

5225

4120

745

110

115

1425

0 1000 2000 3000 4000 5000 6000 7000

Europe

Asia Pacific

Latin America

Middle East

Africa

1111,,740740PotentialPotential

StoresStores

InternationallyInternationally

Still room to grow – even here …

No Stores

More than 100 Stores

Fewer than 100 Stores

(Company-operated North American stores only)

QUESTIONS?

Thank you!

Onion HeadSiriporn Pongvinyoo

mrkokung@hotmail.com