starbucks 10-k analysis

Pavneet Singh

Michael Watts

Brent Wang

Starbucks 10-k AnalysisProduct Supply

Starbucks is committed to selling the finest whole bean coffees and coffee beverages

We control coffee purchasing, roasting and packaging, and the global distribution of coffee used in our

operations. The price of coffee is subject to significant volatility. Although most coffee trades in the

commodity market,

Supply and price can be affected by multiple factors in the producing countries, including weather, natural

disasters, crop disease, general increase in farm inputs and costs of production, inventory levels and

political and economic conditions.

Total green coffee purchase commitments as of September 27, 2015 were $1.1 billion,

We depend upon our relationships with coffee producers, outside trading companies and exporters for our

supply of green coffee.

Starbucks operates seven farmer support centers

Risk Factors

not successfully scaling our supply chain infrastructure as our product offerings increase and as we

continue to expand;

the addition of approximately 1,800 net new stores

Approximately one-half of net new store openings will be in our China/Asia Pacific segment, with

approximately 40% coming from the Americas and the remaining 10% from the EMEA segment.

disruption in energy supplies affecting our markets.

“Interruption of our supply chain could affect our ability to produce or deliver our products and could negatively impact our business and profitability. “

Any material interruption in our supply chain, such as:

• material interruption of roasted coffee supply due to the casualty loss of any of our roasting plants

• interruptions in service by our third party logistic service providers or common carriers that ship goods within our distribution channels

• trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions

• natural disasters

Food, beverage and other products are sourced from a wide variety of domestic and international business partners in our supply chain operations, and in certain cases are produced or sourced by our licensees directly.

A vendor's or supplier's failure to meet our standards, provide products in a timely and efficient manner, or comply with applicable laws is beyond our control. These issues, especially for those products for which we rely on one or few suppliers or vendors, could negatively impact our business and profitability

Inventories (in millions)

Sep 27, 2015 Sep 28, 2014

Coffee:

Unroasted $ 529.4

$ 432.3

Roasted 279.7

238.9

Other merchandise held for sale 318.3

265.7

Packaging and other supplies 179.0

154.0

Total $ 1,306.4

$ 1,090.9

Inventory levels vary due to seasonality, commodity market supply and price fluctuations. As of September 27, 2015:• we had committed to purchasing green coffee totaling $819 million under fixed-

price contracts and an estimated $266 million under price-to-be-fixed contracts. • approximately $38 million of our price-to-be-fixed contracts were effectively fixed

through the use of futures contracts

Item 2. Properties

The significant properties used by Starbucks in connection with its roasting, manufacturing, warehousing,

distribution and corporate administrative operations, serving all segments, are as follows:

Location Approximate Size

in Square Feet Purpose

Rancho Cucamonga, CA 265,000

Manufacturing

San Francisco, CA 79,000

Warehouse and distribution

Stratford, CT 81,000


Augusta, GA 131,000

Manufacturing

Minden, NV (Carson Valley) 360,000

Roasting and distribution

York, PA 888,000

Roasting, distribution and warehouse

Gaston, SC (Sandy Run) 117,000


Lebanon, TN 680,000

Distribution center

Auburn, WA 491,000


Kent, WA 510,000


Seattle, WA 1,004,000

Corporate administrative

Amsterdam, Netherlands 97,000


Samutprakarn, Thailand 81,000


We own our roasting facilities and lease the majority of our warehousing and distribution locations. As of

September 27, 2015, Starbucks had 12,235 company-operated stores, almost all of which are leased. We also lease

space in various locations worldwide for regional, district and other administrative offices, training facilities and

storage. In addition to the locations listed above, we hold inventory at various locations managed by third-party

warehouses.

Demand

• Total Revenue for 2014 was $16.5 Billion

• 75 percent of the total revenue is based on the American segment.

• 75 percent of American Revenue was based on the sales of beverages.

• Beverage sale in America was about $10 Billion.

• The demand for the coffee cups around 4 billion of the company.

• The demand was tied to the wellness of the operating segment of America.

Risks

• Starbucks faces include late delivery from supplier

• Slow replenishment lead time

• Damaged/unusable beans and imprecise demand forecasts

• The transportation risks and cost

Supply Side concerns

• Starbucks uses C.A.F.E Practices to ensure viable supply of high quality coffee beans.

• Practices are guidelines to ensure – high quality coffee beans, – promote equitable relationships with farmers, workers, and

communities– protect the environment Suppliers were chosen meticulously to

smooth the forecasted supply

• Fluctuations and long supply response times

• Costa Rica, Brazil, Vietnam, and Columbia make up the majority of the global supply

Manufacturing

• Processing plants – From beans to coffee

• Starbucks currently owns and operates four coffee plants in the United States– Kent, Washington– Minden, Nevada; – York, Pennsylvania – fourth U.S. plant, in Columbia, South Carolina.

• Adding the fourth roasting plant helped the company with its coffee production – by reducing its transportation costs – lead time. – With the new facility company switched from seven-day operations to five

days.

Supply Chain Goal

• Making the supply chain more efficient will have a high impact on its operating cost.

• Operating cost– Transportation,– distribution, – Logistics

• Company ships so many different products around the world– With 70,000 to 80,000 deliveries per week– the inbound shipments from around the world,

• The company brings coffee beans from Latin America, Africa, and Asia to the United States and Europe in ocean containers.

• The unroasted beans are trucked to four storage sites

• The finished product is transported to the regional distribution centers.– These regional distribution warehouses range from 200,000 to 300,000 square feet in size.

• Starbucks runs five regional distribution centers in the United States

Recommendation 1

• We tried to add a location in Houston, Texas

• Warehouse with capacity of 100,000 sq. ft.

• Goal

– to reduce cost for the logistics cost in the neighboring states

– Help the growth in Mexico

Recommendation 2

• Location Coordinates

• N 34.52

• W 117.57

• Results in more efficient than Houston

Starbucks USA Retail Locations

more than 80% of the USA (that's 250,000,000 people) live within 20 miles of a Starbucks.

starbucks 10-k analysis

Documents