While the sale of branded products through retail and foodservice accounts for only a small proportion of the company’s total revenue, it is instrumental in developing and building brand loyalty. The bulk of the revenue from this segment stems from the US division, where Starbucks has a licensing relationship with Kraft Foods Inc to sell branded products, including Starbucks coffee. Through the Kraft partnership, distribution has also been expanded into Canada and the UK.
The company also operates two joint ventures in which it has a 50% equity interest: North American Coffee Partnership, a joint venture with Pepsi-Cola Co to develop and distribute bottled Frappuccino and Starbucks DoubleShot coffee drinks, and Starbucks Ice Cream Partnership, a joint venture with Dreyer’s Grand Ice Cream to develop and distribute ice cream products. (Spulber, 2007) Starbucks also has a partnership with Jim Beam Co, a unit of Fortune Brands Inc, to manufacture and market Starbucks branded premium coffee liqueur products in the US and Canada. Market performance for the third quarter of 2007 continued to be positive for Starbucks in the US, with strong single-digit growth for the brand in the premium coffee segment.
Financial performance has been strong, with total revenue increasing by over 22% in the fiscal year ending September 2006. Both operating segments saw strong levels of growth, with the company-operated segment increasing by over 21% and the specialty segment up by over 23%. (Michelli, 2006) Within the company-operated segment, sales growth has been driven by outlet expansion, but comparable-store sales have also been positive, with global comparable store sales for company-operated outlets increasing by 7% in 2006, marking the 15th consecutive year with comparable-store sales growth of 5% or greater.