Executive Summary
Starbucks performed well in fiscal 2007 under the care and guidance of Howard Shultz, the founder of the Company, Chairman, President and Chief Executive Officer all rolled into one. Starbucks does not rule the coffee realm unchallenged. The Company’s primary domestic competitors for coffee beverage sales are quick-service restaurants and specialty coffee shops.
Starbucks also faces well-established competitors in many International markets and increased competition in the U.S. ready-to-drink coffee beverage market. The Company’s whole bean coffees compete directly against specialty coffees sold through supermarkets, specialty retailers and a growing number of specialty coffee stores.
Starbucks is organized into three reportable operating segments: United States, International and Consumer Products Group (CPG). The United States and International segments both are made up of the basic Starbucks retail stores. The Company’s International stores continue to grow rapidly in number. Starbucks also makes their coffee and coffee-related products available via mail order and online.
The success of Starbucks in fiscal year 2007 may well be nothing more than a paper tiger. Even though domestic sales were within the Company’s projections, they had to accomplish their goals through price increases rather than increase in sales. This led to stabilization (even a decline in some areas) in the actual number of transactions that occurred, as new customers were balanced out by those that left due to the higher pricing. If this trend were to continue and the company persists in higher pricing of its product, the future may bode ill for the company as sale transactions continue to fall in favor of ...