STARBUCKS AIMS AT INNER CITY
DEAL WITH MAGIC JOHNSON COMPANY IS MADE PUBLIC

BY ARTHUR C. GORLICK P-I Reporter

Friday, February 6, 1998

Section: Business, Page: B1

Seattle's Starbucks Coffee Co. will team with basketball legend Earvin ``Magic" Johnson to bring coffee shops to underserved, inner-city urban neighborhoods across the country, Starbucks announced yesterday.

Howard Schultz, Starbucks chairman and chief executive officer, disclosed the joint venture with Johnson Development Corp. at the Starbucks annual meeting in Seattle's Paramount Theatre.

As a cheering crowd of about 2,500 shareholders applauded, Johnson strode across the stage and he and Schultz embraced.

Johnson's company has a growing string of successful movie theaters in minority urban and suburban neighborhoods in Los Angeles, Atlanta and Houston.

The inner-city market ``has been underserved for a long time," Johnson

said.

Some of the Starbucks retail outlets will be located in Johnson's movie theaters, and both Starbucks and Johnson's JDC will share equally in the retail project and in the profits, Schultz said.

Schultz also announced that Starbucks will bring its coffee ``to every supermarket in America."

Supermarket sales of Starbucks coffees have been undergoing successful tests in Portland and Chicago, but will begin a rollout in 10 markets this spring, Schultz said.

Included will be Seattle, Los Angeles, San Francisco, Portland, Spokane, Denver, Salt Lake City, Billings, Mont., Phoenix and Albuquerque.

Schultz called the move to market Starbucks coffees in supermarkets ``a real turning point for the company."

Plans call for the coffee to be sold initially in 3,000 grocery stores beginning April 14.

``The goal is that every major supermarket will have Starbucks coffee," Schultz said.

Schultz told shareholders that ``90 percent of the coffee in supermarkets is stale" and that Starbucks coffees will be sold in special packages that will keep it at the same degree of freshness as customers receive in Starbucks retail stores ``without cannibalizing" sales at Starbucks own stores.

Starbucks is also developing take-offs on its popular Frappuccino drink that would include a Super Frappuccino laced with vitamins, and a sugar-free version.

Frappuccino accounted for $200 million in sales in 1997, more than the entire company made when it began offering shares to the public in 1995, Schultz said.

Starbucks reported $967 million in 1997 revenue, along with net earnings of $22 million. The company's retail coffee shops accounted for 86 percent of revenues last year.

Starbucks now has 1,500 stores in 28 states, the District of Columbia and Canada and projects 350 new stores in 1998, along with 40 new Pacific Rim stores, mainly in Taiwan and South Korea.

The company, which currently has outlets in Japan and other Asian countries, eventually plans to open outlets in Hong Kong and mainland China.

The company also projects it will achieve its goal of 2,000 stores before its deadline of the year 2000.

A vast band of Midwest and Southern states from North Dakota to Louisiana currently have no Starbucks outlets and will be targeted as a developing market and the company will expand its mail order and supermarket sales of coffee ice cream, bottled Frappuccino and other products, Schultz said.

This article contained at least one photo or illustration as described below:

Type: Photos

Description: (1) PHIL H. WEBBER / P-I: (Color) Starbucks Chairman Howard Schultz with retired basketball player Earvin ``Magic" Johnson, whose company will work with Starbucks to open inner-city coffee shops.
(2) PHIL H. WEBBER / P-I: Coffee was served, of course, at yesterday's annual meeting of Starbucks' stockholders at the Paramount Theatre in downtown Seattle.

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