Industry News | September 28, 2007

Starbucks and Pepsi in Multi-Country Deal

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Starbucks (NASDAQ:SBUX) and PepsiCo (NYSE:PEP) announced today they are expanding their relationship beyond North America. This expanded partnership has the potential to bring Starbucks ready-to-drink coffee beverages to an increasing number of coffee lovers around the world.

“Coffee is the heart of our business,” says Gerry Lopez, president of Starbucks Global Consumer Products Group. “With our coffee expertise and PepsiCo’s extensive sales and distribution network, this joint venture will allow us to provide an authentic Starbucks coffee experience to millions more consumers around the world anytime and anywhere they want it. This could include countries that may not currently have Starbucks stores.”

“We are very excited about building on the success of the North American Coffee Partnership between PepsiCo and Starbucks, which essentially created the ready-to-drink coffee market in the U.S. and Canada,” says Michael White, CEO of PepsiCo International and vice chairman of PepsiCo. “As we look ahead, we see opportunities to bring outstanding Starbucks ready-to-drink coffee products to consumers in many more countries.”

The joint venture will enable the companies to provide new and existing Starbucks ready-to-drink beverages via PepsiCo’s beverage distribution channels, including grocery and convenience stores, as well as other locations. Starbucks will provide the coffee knowledge, and all coffee used in the products will be sourced and roasted in accordance with Starbucks stringent coffee quality standards.

Initial Expansion into China

The first market to benefit from the expanded relationship outside of North America will be China where there are more than 540 Starbucks stores operating.

“Thinking back to my first trip to China, I was humbled by the warmth of the people and acceptance and enthusiasm for the Starbucks brand,” says Howard Schultz, chairman of Starbucks Coffee Company. “It is an honor to now announce our next commitment to China by making it the first country, as part of the new joint venture, where Starbucks ready-to-drink coffee beverages will be available.”

Starbucks already sells ready-to-drink coffee beverages in South Korea, Japan, and Taiwan through relationships with other companies. The expanded relationship with PepsiCo will not change the current relationships in those three markets.

In North America, Starbucks bottled Frappuccino coffee drinks, Starbucks DoubleShot espresso drinks, and Starbucks Iced Coffee drinks are available through a joint venture between Starbucks and PepsiCo. A new line of dark chocolate Starbucks bottled Frappuccino beverages were announced this fall. The first offering for the holiday season is a Starbucks Dark Chocolate Peppermint Mocha bottled Frappuccino coffee drink.