SYS-CON MEDIA Authors: Sean Houghton, Glenn Rossman, Ignacio M. Llorente, Xenia von Wedel, Peter Silva

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Starbucks Accelerates Growth of Multiple Diversified Store Formats and Debuts Iconic Premium Coffee Retail and Roastery Experience

Starbucks Coffee Company (NASDAQ:SBUX) today announced the expansion of the company’s store formats and evolution of their customer experience segmentation in FY15 with the launch of a one-of-a-kind, interactive Starbucks Reserve™ Roastery and Tasting Room dedicated to roasting, coffee education and increased availability of their fast-growing, highly successful small-lot Starbucks Reserve® coffees. This consolidation of small-batch roasting will allow the company to expand their Starbucks Reserve® coffee line to 1,500 locations globally, as well as open at least 100 stores designed to highlight these rare coffees exclusively. Recognizing the diversity of needs across their customer base, Starbucks also plans to test small-footprint, express stores focused on offering convenience to customers. This evolution in store experience builds on the profitability of tailored, localized store design and formats.

“Everything we have created and learned about coffee has led us to this moment. The Starbucks Reserve Roastery and Tasting room is a multi-sensory experience that will transform the future of specialty coffee,” said Howard Schultz, chairman, president and chief executive officer of Starbucks. “We plan to take this super premium experience to cities around the world, elevating the Starbucks experience not only through these stores but across our entire business.”

In December, Starbucks plans to open its first-ever Starbucks Reserve™ Roastery and Tasting Room designed to be an integrated coffee roasting, education and retail space allowing the company to expand its small-lot sourcing program and to serve as homage to the rich history of specialty coffee. A first-of-its-kind union for Starbucks of coffee theatre and manufacturing, this iconic Seattle destination will allow Starbucks to double its small-batch roasting capacity and grow its Starbucks Reserve® coffee presence from 800 to 1,500 stores worldwide, by the end of FY15. More than two years in development, this unprecedented experience will allow customers to engage with Starbucks passion for coffee in a 15,000-square-foot interactive retail environment devoted to beverage innovation and excellence.

Ten years ago, Starbucks first brought these premium coffees to customers with their line of Black Apron Exclusives™. Formally launched in 2010 under the Starbucks Reserve brand, this exceptional collection of unique, small-batch arabica coffees became available in select stores and online – some of which have sold out in less than 24 hours. In 2011 Starbucks opened its first international Starbucks Reserve® store in Tokyo, Japan, and by the end of FY14 will be available in 21 countries. As China becomes the second-largest market for Starbucks in 2015, Starbucks Reserve® coffee will be integrated into this specialized, day part growth model. Recently, Starbucks opened its first ever Starbucks Reserve® location in Latin America as part of a three-level store serving 100 percent Colombian coffee and is on track to exceed over $1.5 million in year-one sales. On Monday, September 8, Starbucks will offer customers a first-of-its-kind Starbucks Reserve® coffee developed by Starbucks head of agronomy Carlos Mario Rodriguez in partnership with a Costa Rican cooperative on the La Ines coffee farm.

In addition to expanding this in-store offering, the company will create a specialized store experience devoted to highlighting these rare, limited-availability coffees in at least 100 locations in the next five years. These locations will benefit from ongoing new store development and renovation programs delivering an enhanced customer experience. In 2014, the new U.S. store portfolio averaged over $1.2 million in year-one sales with a return on investment of approximately 50% exceeding the best-in-class investment ratio of 2 to 1.

Complementing this expanding café experience, Starbucks will be investing in smaller, alternative store footprints that address the increase in urbanization and decentralization of retail. With Drive Thru stores accounting for more than 40% of U.S. company-operated stores and higher-than-average sales growth than non-Drive Thru locations, there is significant opportunity to meet commuting customers in smaller experiences.

“The evolution of our store experience is a direct reflection of how our customers are interested in both accessibility to the brand as well as speed and convenience. Our scale affords us the unique opportunity to bring a flexible portfolio of options rooted in our core commitment to coffee quality,” said Cliff Burrows, group president, U.S., Americas, and Teavana.

In addition to providing a concentrated set of beverage and food offerings, the express formats will look to integrate Starbucks digital payment platform, including mobile ordering to expedite speed of service in these locations. The growth of Starbucks digital payment applications and online presence will also allow the company to identify opportunities where store segmentation can support an enhanced physical and digital retail experience to expedited merchandise and at-home coffee purchases or subscriptions for take-home or home delivery.

Starbucks is on track to bring approximately 1,550 net new stores in FY14 and 1,600 net new stores in FY15 with nearly 300 net new company-operated locations in the U.S.

About Starbucks

Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting high-quality arabica coffee. Today, with stores around the globe, the company is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit us in our stores or online at www.starbucks.com.

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