Conference Call Studied Is the

Conference call studied is the Starbucks Q4 2010 Earnings Conference Call. This can be accessed at the Investor Relations section of the Starbucks website at the following URL: http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhome Access will be Friday December 3, 2010. Starbucks had record revenues and net income in fiscal 2010 and for Q4 2010. There were several executives on the call. CEO Howard Schulz began the call with a brief overview. The financial performance was outlined by CFO Troy Alstead. He outlined revenue, traffic and operating income growth.

John Culver, the President of Starbucks International, was also on hand to discuss issues involving the company's international businesses. The firm's other executives did not have any notable participation in the conference call. The industry in which Starbucks competes can be viewed in a few different ways. The core business is retail coffee, but the company is also competing to an extent in the quick service food industry. The company markets its coffee shops around the world, with both company-owned and franchised stores.

The company also markets beans, instant coffee and other ancillary coffee products at its stores. Starbucks also competes in the ready-to-drink category, via a branding agreement with Pepsi. Starbucks' instant product, VIA, is viewed as the "single cup" industry, and it competes against Nestle's Nespresso product in this segment among others. Starbucks utilizes a differentiation strategy, using its brand name and reputation for innovation within the industry as a means of gaining competitive advantage. There are a number of competitors.

Direct competitors in coffee shops include a variety of local, national and regional players. Most of these have similar store formats to Starbucks, but none has the same size. Many quick service restaurants also offer coffee, and several compete directly against Starbucks. Some examples would be McDonald's, Dunkin Donuts and Tim Horton's. In each market, the competitive mix will differ, but the type and size of competitors seems to remain largely consistent. There are also independent coffee shops as competitors. Lastly, other forms of coffee are also competitors to Starbucks.

Store-bought coffee is an option for some consumers during difficult economic times. Other sources of caffeine can also compete against Starbucks, especially in Asia. In Asia, Starbucks competes as a 'third place' away from home and work, so other such spaces can also compete (shopping malls, for example). Overall, the industry is highly-fragmented, with many players competing for the different customer and geographic segments. The industry is characterized by strong volume and strong customer loyalty. Many customers visit coffee shops multiple times per week.

The industry has been subject in recent years to shifts in demand, and in price elasticity of demand. For the most part, the coffee shop industry has matured in recent years, after a strong period of robust growth. There is a significant emphasis on growth via international expansion. Many coffee chains operate in multiple countries, Starbucks in particular. The company views Asia and Western Europe as key areas for growth going forward. Starbucks also views both India and Brazil as markets that are worth entering in the near future.

Within the conference call, neither the company nor the analysts discussed the competitive environment in any detail. There was some discussion with respect to the industry overall, including discussion about the price of coffee and some of the responses that Starbucks was going to undertake in reaction to shifts in the overall environment. In particular, the company trumpeted its ability to earn record profits and revenues despite the ongoing economic slowdown. The overall conference call experience is interesting.

It is unusual to have such direct access to the leaders of a major company. The information contained can be largely understood to be the same as will be in the annual report, so he call is essentially a preview of that document. The depth and breadth of the information provided is exceptional -- it would take hours to research that information independently.

For example, there is information on some of the back-end tactics that the company has undertaken in order to improve its performance and profitability -- information that because of its lack of visibility seldom finds its way into the business press. The call is relatively formal in nature, however. The call and the messages that the company sends in the call, are carefully controlled. Even Mr. Schultz talking about the success of the company in the past year is flat and emotionless.

Some of the explanations were long and detailed -- concision was not a big factor in this call. The questions come in from analysts, and this are often focused on issues that the different analysts have with respect to the company. The analysts tend to be focused on financial performance and metrics. Some of the questions referred to guidance for the coming fiscal year, but the company was generally not forthcoming with respect to specific details. Each question was generally followed by a long explanation from the firm's executives.

For the most part, the questions were fairly specific and not especially interesting to the general investor audience. Among the issues raised were the price points that the company wanted to set, and the company's relationship with Kraft, something that is subject.