Starbucks to Create New Lifestyle Portal;
New Internet Subsidiary to be Formed
Business Wire - June 30, 1999 16:21
SEATTLE--(BUSINESS WIRE)--June 30, 1999--As part of its innovative Internet strategy, Starbucks Coffee Company (Nasdaq:SBUX) announced today that it will create a new lifestyle destination/portal that will include expanded content and commerce offerings within the gourmet/specialty food, kitchen products, and home furnishings categories.
The new portal will be launched in the form of a unique "canopy brand" site in time for the 1999 holiday season. It will represent a single destination for customers to purchase both traditional Starbucks core coffee, tea and music offerings as well as complementary products and services from a portfolio of selected online and land-based retailers.
In conjunction with the portal development, Starbucks plans to announce a major strategic partnership later this summer.
"Creation of the canopy brand portfolio enables us to extend the leadership we now enjoy as a specialty coffee retailer to new and highly complementary products centered around the lifestyle of our customers," said Howard Schultz, Starbucks chairman and ceo.
"Our research indicates that the revenue opportunity represented by these categories, which is estimated at more than $100 billion, is enormously attractive given the natural synergies with our core customer demographics," he added. "Even more importantly, there is tremendous fragmentation of these categories in both the traditional and Internet retailing worlds. Not only are there no clear leaders, but in many cases the categories are under-retailed."
Starbucks research also indicated that customers "have given us the license to enter this $100 billion marketplace," Schultz said. "This is a category in which we can win; and we intend to be the category leader."
"Our business model for the canopy brand site is differentiated from other Internet portals and e-malls by the degree of integration and equity relationships we pursue with our online retailing partners," he continued. "This is not just about traffic deals. It is about establishing a much higher level of operational and promotional synergy between organizations who share our vision and values, which enables us to collaboratively reduce the cost of customer acquisition and back office infrastructure investment."
To manage the execution of the new portal launch, Starbucks plans to form a new subsidiary named Starbucks X. Starbucks X will include Starbucks current direct-to-consumer sales channel, its newly launched publishing venture with Time, Inc. (Joe magazine) and accompanying website (joemag.com), and its existing CD music operations, as well as recently announced alliances with Talk City, an Internet chat/community provider, and Internet and cable media enterprise Oxygen Media.
Heading up the Starbucks X management team is senior vice president Debbi Gillotti, who joined Starbucks as chief information officer in 1997. Gillotti has played a major role in leading the company's Internet visioning to date and will continue to direct strategy and execution for this new venture.
Starbucks X will be positioned to support rapid portfolio growth for the new portal through acquisitions, investments and alliances with leading Internet and land-based retailers.
"As we said in April, we are not just another company adding .com to our name," Schultz said. "We are embracing a truly meaningful venture which can realistically position us for significant and profitable growth in the years ahead."
More than 75 percent of Starbucks customers, who have an average income of more than $70,000, are already on the Internet. In addition, more than 60 percent of Starbucks online www.starbucks.com customers do not live in areas serviced by a Starbucks retail store.
"Our Internet model gives us the distinct competitive advantage of dramatically lower customer acquisition costs," Schultz added. "Marketing expenses associated with attracting and retaining customers are generally the primary cause of ongoing operating losses for most pure-play Internet companies. I am also excited about the opportunity to leverage our 2,000-plus physical locations. We'll use these assets to direct people right to our canopy brand portal, which benefits all merchants in the portfolio."
Typical Internet pure-play retailers spend 40 percent to 60 percent of projected revenue to attract and retain customers.
"The affiliations we've announced earlier this year with Oxygen Media and Talk City provide a tremendous opportunity for building both community and content to augment our expanded merchandise offerings," Schultz said. "It demonstrates our commitment to partner with world-class providers while providing incredible opportunities to connect with customers in new and different ways.
"We will give people very compelling reasons to come shop and entertain themselves," Schultz added. "We are defining a methodology that allows us to deliver a seamless consumer experience through our retail stores, cable, print media and the Internet."
With respect to any forward-looking statements in this release, actual results may differ materially from our expectations. Factors such as coffee and other raw material prices and availability, execution of expansion plans, implementation of our Internet strategy, and the effect of competition, among others, could impact such results and are discussed in more detail in our annual and quarterly reports filed with Securities and Exchange Commission.
Starbucks Coffee Company is the leading retailer, roaster and brand of specialty coffee in the world. In addition to its retail locations in North America, the United Kingdom, the Pacific Rim, and the Middle East, Starbucks sells whole bean coffees through its specialty sales group, direct response business, supermarkets and online at www.starbucks.com. Additionally, Starbucks produces and sells bottled Frappuccino(R) coffee drink and a line of premium ice creams through its joint venture partnerships and offers a line of innovative premium teas produced by its wholly owned subsidiary, Tazo Tea Company. |
