Serving Up the Starbucks Experience and Energizing Growth through Value Chain Optimization GMA Executive Conference I August 27, 2012 Presented by: Daryl Brewster Founder & CEO Brookside Management, LLC Kate Newlin Principal & Founder Kate Newlin Consulting Ric Schneider SVP, Global Procurement Starbucks Coffee Company Dr. Mary Wagner SVP, Global R&D/ Quality & Regulatory Starbucks Coffee Company
Growing in Slow Growth Economy Low Growth in Earnings is Expected Slow growth predicted for U.S. economy Christine Hauser, April 5, 2012 Fed Officials Sees Lower U.S. Growth, Slow Progress On Jobs The Brookside Growth Council 2
Agenda Growth Benchmarking Growth Drivers Growth Case Study Q&A The Brookside Growth Council 3
Indexed to 100 Food and Beverage Industry shows a better trend than the market (UBS) 180 Food & Beverage v. S&P (since 2007) 160 140 Food & Beverage¹ S&P 500 Change (%) 120 100 80 60 40 20 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 The Brookside Growth Council 4
Five Delivered Gold-Medal Growth More than 5 X Total Shareholder Return (TSR= stock appreciation + dividends since 2000; F&B, Other CPG, Retailers) The Brookside Growth Council 5
5 More Earned Growth Silvers 3 to 5 X Total Shareholder Return (TSR= stock appreciation + dividends since 2000; F&B, other CPG, Retailers) The Brookside Growth Council 6
Key Drivers of Growth Champions Passion for Growth From the Top Entrepreneurial spirit throughout the Value Chain Internal & External The Brookside Growth Council 7
Key Drivers of Growth Champions Passion for Growth Aligned with Consumer Trends Growing Global Middle Class (Nestle, Coke) Bifurcation in US (Ralcorp & Hain; DG & WF) Responsive to Consumer Trends throughout the Value Chain Expansion: channels, geographies Marketing M&A The Brookside Growth Council 8
Key Drivers of Growth Champions Passion for Growth Aligned with Consumer Trends Innovation (incremental & breakthrough) New ways of looking at old categories (IRI Pacesetters 06-11) Calorie counts: Nabisco 100, MGD 64, Bud 55, Trop 50 Category X-Overs: Cracker Chips, M&M Pretzels, Bailey s Creamers Restaurant to Retail: SBUX, Dunkin Donuts, PF Chang Meals The Brookside Growth Council 9
Key Drivers of Growth Champions Passion for Growth Aligned with Consumer Trends Innovation Integrated Value Chain An enabler versus a bottleneck Say no in order to grow core and non-core Consistent with brand/company The Brookside Growth Council 10
Case Study Starbucks The Brookside Growth Council 11
Flashback to 1980 s The Brookside Growth Council 12
How did we get there? (And how did we get away from there) 1926 Hills Brothers Coffee Vacuum-Packing erodes need for local roasting 1926 Maxwell House Good to the Last Drop trademarked 1963 Procter & Gamble purchase Folgers Coffee Company, quickly becoming the top coffee brand in America 1971 Peet teaches three friends his coffee roasting techniques. They open first Starbucks, selling only freshly-roasted coffee beans (no brewed drinks) 1987 Starbucks Corporation. 17 stores in all 1900 1903 1903 First de-caf 1906 1906 First Instant 1926 1960 1963 1966 1969 1971 1987 1991 1960 Juan Valdez Introduced 1966 Alfred Peet opens Peet s Coffee in Berkeley Coffee Achievers 1969 I believe that the American coffee industry is doing itself irreparable harm by mass marketing mediocre coffee at a low price. I think what is happening today in the coffee business is just a foreshadowing of the eventual indifference of the total American public to the world of coffee drinking. 1991 Starbucks begins offering stock option programs to its workers, including parttime employees, becoming the first privately owned United States company to do so The Brookside Growth Council 13
Coffee Achiever s Campaign The Brookside Growth Council 14
Personality is an unbroken series of successful gestures; see also Starbucks - F. Scott Fitzgerald The Brookside Growth Council 15
The unbroken series of successful gestures The Barista Home & Aroma The Tension - Known - Unknown The Locations The Brookside Growth Council 16