A Message from Howard – Fiscal Year 2009 – A New Beginning

Dear Partners,
As Fiscal Year 2008 comes to a close, I wanted to share my thoughts on where we stand after this intense and challenging year. The economic downturn had a significant impact on our financial performance. We faced a number of challenges that tested our commitment and resolve, many as a result of our growth over the last several years. Yet, as I look back at the year, I can say with confidence that we accomplished a great deal together and made the tough decisions that position us well for Fiscal Year 2009. Looking ahead, we have an unprecedented opportunity to create meaningful change in the business, and as I have said, this is a marathon, not a sprint.

Transforming the Starbucks Experience
Since we announced our transformation strategy, we have swiftly worked to implement the plan. I would like to take this opportunity to highlight just a few of our successes to date, and to outline what must still be done to transform the business:

  • Strengthen the Core: In FY08, we re-focused on serving perfect beverages every time with everything from Espresso Excellence training to the reinvention of brewed coffee, getting back to grinding coffee in the stores and shortening hold times. We introduced new coffees with more in the works. And, we responded to customers by offering an improved breakfast sandwich and new savory breakfast selections which launch in many markets next week. In FY09, we must continue to celebrate our coffee core -- with a renewed sense of authenticity and authority.
  • Elevate the Experience: We revamped the FY09 calendar to balance core focus with big-idea innovations ? all with an eye toward brand relevance. We expanded two-way communications with our customers beyond the store to mystarbucksidea.com. We launched our Health and Wellness platform with VivannoTM Nourishing Blends and our perfect oatmeal - our most successful food product launch to-date. Recognizing the impact of the economy, we offered customers value through Starbucks Card Rewards and treat receipts. And, we focused on the Starbucks Experience by developing exciting new store designs. In FY09, we will renew a conversation about the spirit of our company, and how we are part of something bigger. We call this StarbucksTM Shared PlanetTM, and you'll be hearing more about it in the coming weeks.
  • Invest and Grow: In FY08, we restructured the Starbucks organization and senior leadership team to better support customer initiatives. We announced the closure of underperforming stores, while opening stores in growth markets like Russia, Central Europe and Argentina. We continued to build on the success of our Consumer Products Group by introducing new products in new markets. And our Licensed Stores business worked toward elevating the customer experience, resulting in the best customer care scores ever. In FY09, we must view growth differently than we ever have. It means fewer, better stores reaching more customers. It means innovative offerings that complement our coffee and delight our customers. This is a new way of looking at our business.

We are formally kicking off this fiscal year in a few weeks, as retail partners head to New Orleans for our North America Leadership Conference. These few days will give many of our leaders an opportunity to reconnect with the heart of our company through community involvement, to commit anew to the difficult work ahead and to learn from each other before going back to their stores to implement exciting changes. For the many partners who aren't able to experience the conference first-hand, we will be sharing it through meetings, video and online experiences that will allow you to learn more about our path forward and the important role you play on that journey.

I just returned from a visit to New Orleans, a visit that reaffirmed why I believe so strongly in our ability to succeed through these challenging times. In the words of Martin Luther King, Jr., "The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy." This has certainly been true of the people of New Orleans. I believe it is also relevant for our company and our partners at this critical time in our history.

I want you to know that it is my privilege and honor to work side by side with you as we transform Starbucks for the years ahead. I wish that I could personally thank each of you for your notable efforts during this time. I just hope that you can sense the sincere gratitude in my words as well as the passion that I have for our company and you, the partners who make Starbucks a unique and enduring brand.

I will close this note by reiterating that because of you, I am confident that Starbucks is in a strong position. We are on the right track going into FY09, which in my mind, means that, without question, we will strengthen our connection with our partners, exceed our customers' expectations, build long-term value for our shareholders, and be the undisputed global leader in the premium specialty coffee business.