Starbucks Corporation (NASDAQ:SBUX)
2016 Annual Meeting of Shareholders Conference
March 23, 2016 01:00 PM ET
Howard Schultz - Chairman, President and CEO
Mary Dillon - Board Member and CEO, Ulta Beauty
Olden Lee - PepsiCo, Inc., Retired Executive
Kevin Johnson - President and COO
Michael Conway - President, Global Channel Development
Gerri Martin-Flickinger - EVP and CTO
Alicia Keys - Performer
Lucy Helm - Executive Vice President, General Counsel and Secretary
Justin Danhof - General Counsel, National Center for Public Policy Research
Good morning, and welcome to our Annual Meeting of Shareholders, our 24th in our history. What an amazing performance. I’d care to share a little secret with you these are not professional musicians or dancers. These are Starbucks' partners from China. In January at our Family Forum in Chengdu I saw them perform, we were so blown away. We had to bring here to Seattle for the Annual Meeting. Most of them have never been to America, this is a huge-huge opportunity for them and I just think they did so well. Could you just do it one more time and tell them that you appreciate it.
Well, good morning. And we have a great meeting planned for you and we can hear your enthusiasm backstage and thank you all for coming. There was a little bit of chaos this morning I think there was some rumor that the meeting was cancelled obviously you didn’t get the memo. Thank you for being here.
Let me begin by introducing some very special guests, beginning with Starbucks’ Board of Directors would you please stand and be recognized. Thank you. I want to personally welcome Mary Dillon to the Board she is the CEO of Ulta Beauty, Mary, welcome. Thank you. And in addition with great respect and appreciation for his many years of service since 2003 Olden Lee is retiring from the Board. Olden thank you very much we had a nice evening last night please stand and be recognized.
We have many Starbucks partners who have come from far away, our international partners, you know who you are thank you for being here, members of the military and spouses would you please stand and be recognized. Thank you.
Thank you. For 45 years we’ve been sourcing and roasting and blending the highest quality Arabica coffee in the world and today really for the first time we have assembled all of our master coffee roasters from around the world, I know you’re here somewhere, thank you for being here and thank you for all that you do. Thank you.
And finally, there is Starbucks partners watching the webcast from all over the world, there is many in the audience. Let me just say for all the heroic things that you do that no one sees and all the things you do to add shareholder value and exceed the expectations of the customers, thank you so very much to all the partners who are here and around the world. Thank you.
Okay. We began with a performance about China, so we’re going to stay with China for a while and talk about our business there. We’ve been in China now for 17 years. Many people think it's an overnight success. The truth of the matter is that we actually lost money in China for a number of consecutive years. During that time, there were a lot of cynics, a lot of doubters that perhaps we were not going to make it in China and today I am so proud to tell you that we are sitting in China with 2,000 Starbucks stores in 100 cities and China has become one of the most important and successful businesses around the world for Starbucks Coffee Company.
We made an -- thank you. We made an announcement last quarter on the earnings call that we’ll be opening 500 new stores a year for the next five years in China, that’s more than a store a day, demonstrating our long-term belief in China as a great market for Starbucks. It's going to add significant value as it already has to shareholder value and I wouldn’t be surprised, honestly if one day in the future our business in China in terms of number of stores is larger than the U.S. market, that’s how large the opportunity is.
Today, as we think about China and what it represents, there is a lot of issues that people are talking about in terms of the Chinese economy. And let me just address that in addition to why we are succeeding in China. In addition to the elegance of the store design and the quality of our coffee, not unlike the U.S. business, our China business is exceeding because of the equity of the brand. But the brand has been defined all over the world and in China quintessentially by the relationship that we have with our partners and our partners have with the customers. And that has never been more true than in the last few years as we have really elevated I think a level of trust that we have with our partners and our customers and the families of our partners. You saw in the opening video my friendship and relationship with Jack Ma, we asked him to come speak at the Chengdu Family Forum.
Many years ago Jack invited me to China to speak at a Alibaba event and I went there and while I was there speaking to a lots of his people, I noticed in the audience that there were many family members of the employees of Alibaba there. And it's very usual you don’t see that in an American company meeting where parents would be attending an employee meeting. And from that I had the idea that why don’t we try to do something similar to what Alibaba did. And why don't we begin to have annual meetings in China of not only our partners but also their family members.
Now people at Starbucks in the U.S. specifically said Howard, ''No one's going to a annual meeting of parents of our partners in China." And so there was a great debate, if we have the meeting should we get a small room, a small auditorium because if no one comes we won't be embarrassed, or should we get a big room and anticipate a lot of people are going to come. But we made the decision to rent a place just like this and we had our first annual meeting of parents and family members in Beijing a number of years ago and it was literally one of the most emotional experiences that any of us have had at Starbucks and I think because of the one child rule that has been in China for many years, the unique relationship that parents and grandparents have with that one child is quite unique and we wanted to celebrate that.
So I'm going to give you just a snapshot of the Family Forum we had in Chengdu just last month that we were at and highlight one of our partners in our China business and this is so emblematic of what we experience every time we have one of these meetings. Please take a look.
Every time I see Augmen’s father, kind of tasting coffee like that, you can't make that up, it is just incredible. Let me say just a few things about these family forums that we have had and what I've learnt personally. And it's hard to capture it in that video even though it's quite emotional, we're living at a time no question that there's a tremendous amount of volatility in the world and it's hard to pick up a paper or watch the news on a number of issues, but if you listen to what the naysayers are saying, it's all about the vibe and the vision and the differences between us. You go to one of these family forums and you spend time with our Chinese partners and their parents and I think you’d realize something quite universal, that despite our differences, our politics, our language, our religion, we all basically want the same thing. We want our children to have a better life than we had, we want to be respected and valued and what we really want is an opportunity to show ourself.
And these family forums and our business in China has really elevated that for all of us at Starbucks in realizing the opportunity we have in China and the opportunity we have to uplift lives not only in the U.S. but around the world. The trust and respect we have built with our partners have given rise to the significance of our performance, it's not only about the coffee and the stores, it's clearly about the people and I'll tell you on behalf of myself and the leadership of the company here and in China, we feel a great sense of personal responsibility and I must say love for 30,000 Chinese partners who are wearing the green apron and making sure that we do everything we can just like we've done in America for them and their families to realize their dreams, their hopes and their aspirations.
I don't think, I can leave the China story without addressing much of the negative economic news that has been coming out of China and certainly have been written about a good deal on the financial pages of newspapers and broadcasts. And so let me say this, I'm not an economist, let me just share with you what I know. Probably over the last 10 years, I've been to China personally as much or more than any public CEO, it doesn't make me an expert but I've met with many government officials at the local and national level, and I certainly have spent a lot of time with our partners, with customers and with other Chinese executives who are running companies in China.
Howard Schultz and Starbucks Coffee Company are bullish on China and that was never more true when President Xi visited here in Seattle this summer and I was invited along with other CEOs to attend a group of meetings, many of them were private with him and other government officials and we learned a number of things, but clearly a China is the second largest economy in the world and ladies and gentlemen, it is here to stay. The economy is growing at levels of 6% to 7% a year and that is down from where it was at 8% or 9% and as a result of that, many are saying, it's still may bloom. I don't believe the propaganda and I don't believe in naysayers and Starbucks Coffee Company is investing into the strength of the economy over the long-term.
The middle class currently number is about 300 million people, those are key customers for Starbucks and that middle class is going to grow over the next 10 years to 600 million Chinese people, who we believe are going to be Starbucks customers. So, we're playing the long game in China, we're building one of the most respected and iconic companies and consumer brands in the county. Will there be a technical change in the economy and will there be time-to-time perhaps slight performance changes or drops in Starbucks performances? Probably, what as I said, we see an unbelievable opportunity to build thousands of stores, we're building a great enduring business and I believe China will be as large or more or larger than the U.S. business in the future. So, when you read all the naysayers about the future of China and all that other stuff, understand we've got 2,000 stores in 100 cities, you just saw our group of partners that really represent what we believe are the best of Starbucks in China and you saw the video which I think emblematically captures just one piece of what we're doing in China and that is building the company in a right way, by doing everything we can not only to exceed the expectations of our customers but to exceed the expectations for our people.
So, if you look at the business today, I mentioned this is our 24th annual meeting 24 years ago we had 125 stores, one quarter of profitability and a market cap of about $250 million. As we sit here today, there are approximately 24,000 Starbucks stores even hard for me to believe that. In 70 countries and we're serving about 90 million customer occasions a week and I'm so proud to say that there is 300,000 people wearing the green apron all over the world.
Fiscal '15 was a remarkable year for the company. Over $19 billion in revenue, nearly $4 billion in operating income, our stock grew by 54% for the year, we clearly outperformed every index, including the NASDAQ than we sit on and our market cap is approximately $88 billion.
From day one, our financial performance has always been directly linked to the value and the commitment we have to our people and certainly fiscal '15 with no exception. Almost $300 million invested back in healthcare for our people. As you know, healthcare and equity in the form of stock options have been hallmarks of benefits we have provided over a long period of time, way before the Affordable Care Act, $167 million was earned in equity in the form of stock options for our partners and being stocked since its inception that's the equity in the form of stock options has generated over $1 billion for our people since we started. And last year we matched in terms of 401(k) over $60 million. I think these are all ways in which we can clearly demonstrate that the balance that we’re trying to achieve is shareholder value for you, shareholder value for our people in doing everything we can to exceed the expectations of our customers when they are in our stores.
From the very beginning and we've been committed to this fragile balance between shareholder value and profit and social impact. We have taken that I think more seriously than ever before, resulting in a series of initiatives many of which are quite unorthodox especially for a public company ours such. When people ask me what philosophically is the Starbucks business proposition what is it? And I -- it's very easy for me to respond to that when I say we are a performance driven company through the lens of humanity. We have to have financial performance that is the price of ignition on all the things we are trying to do with regards to social impact.
Before 40 years 40 plus years our culture has been directly linked to really establishing an ongoing dialogue through transparency and trust with our people, we call these open forums. Over the past two years we have had many open forums with our people, more than ever before talking about issues that affect them and their communities. Last year, we had a series of open forums and very emotional conversations on a number of social issues including race. And I think it taught us a lot about our company and it also I think kind of was catalytic in our understanding about our commitment to making sure that we are as much of a diverse organization as possible.
It was through the dialogue of race and what we did last year that these conversations with our people resulted in us understanding a very important and what I will describe as a tragic social crisis in America and that is the play of opportunity use. Nearly 6 million young people in America are not in school and not in work. Many are black and Latino and most of whom are the ages of 16 and 24. Forgetting the issues of Washington and government as a company and as citizens we look at this and we say this is unacceptable what can we do about it and we don’t want to be a by-stander. So we brought likeminded values based companies and leaders together, foundations and nonprofit organizations together to start an initiative of 100,000 opportunities in which we would create jobs for these young people.
And we organized a significant number of job fairs around the country. Starting in Chicago, then Phoenix, then Los Angeles and here is a snapshot of what we have been doing to really do everything we can to create opportunity and hope for people who truly deserve it. Please take a look.
We had a rehearsal and I saw this photo for the first time. And I just -- if you can just take a couple of seconds and just look at the faces of some of these young people, we opened the doors and they just ran in, they ran in for a opportunity, they ran in just for a chance. And we have had such a significant impact in Chicago and Phoenix and most recently in LA and the next one will be in Seattle in May. The coalition has hired over 25,000 young people, Starbucks Coffee Company has hired over 7,000. We have one person who is ready to be a manager. And I think if I had to put kind of a framework on all of this, why are we doing this and what does it mean? Helping young people towards productive lives is a massive economic opportunity for the country and clearly makes us a better organization, it makes our people proud, it demonstrates the values and guiding principles of who we are and what we stand for and believe it or not it adds to financial performance in ways that you can't see on a balance sheet, on income statement, but it does.
As many of you know we have been deeply committed in honoring the service of post 9/11 veterans for a couple of years now, them and their families. 2.5 million extraordinary young men and women have been wearing the cloth of the nation and fighting the wars in Iraq and Afghanistan. Unfortunately it only represents about 1% of the population where most Americans just have not had much skin in the game. These young people are coming home and they are coming home not to a parade, not to a lot of understanding, not to a lot of empathy and sensitivity and I don't think we have really honored our style and promise and do everything we can to take care of them.
And so once again we've asked ourselves the question. What can we do and how can we influence others? We took on the -- not obligation or responsibility, the honor, the privilege of hiring veterans and spouses. We've hired about 6,500 already and I can tell you first-hand everyone of them that I have met has leadership qualities, it's embedded in their own personality and ethics and values, task-driven, team players, they have made us better as a company and they are wonderful people and anyone who is operating a small or large business here today, I firmly-firmly recommend and support that you hire a veteran or a military spouse today.
We've opened 20 military family stores adjacent to bases and this year our family foundation has created transitional training and hiring programs on six military bases and we'll have 18 opened by 2017. Feels like I'm just ticking off one issue in America after another. That's not my intention. My intention really is to have you understand that as shareholders of the company, what really is our core purpose and reason for being? We uncovered another issue probably one of the most important issues to our own partners and that is not unlike the rest of the country, many Starbucks' partners had started college and could not finish, couldn't sustain it because of their own personal debt. There is over $1 trillion worth of debt sitting on the back of young people in America because of their college student loans. As a result of that in partnership with ASU we became the first company in America to provide a free four year college paid degree in partnership with ASU.
And I'm proud to announce we have 5,000 students enrolled, our goal is the company to have 25,000 graduates by 2025. So, thank you, thank you very much. So I'm incredibly proud obviously of the financial results. Not only have we had a record year in fiscal '15 but we've had a number of record years as I've had the privilege of standing before you, but the results really are linked in so many ways to the conscience of the company and that conscience I think drives us in so many ways and I think every company, every organization tries to answer the question as I posed before what is your core purpose and reason for being? And our core purpose and reason for being clearly is to grow the company, build sustainable, enduring shareholder value for you, but we're trying every single day and we're not perfect.
To build the kind of enduring business in which our people are proud to work with Starbucks, they go home and share with their families that they're working for a company they trust and admire and we're doing everything we can as a Company to improve the lives of people in the communities that we serve. All of these social impact initiatives are linked to the aspirations we have as a Company and it's added immense power and relevancy to the brand domestically and around the world.
Now in the past I must tell you some have questioned even criticized these initiatives and me as this is not your responsibility. Your responsibility as a public company is to do one thing, make money. I must tell you not with arrogance I really reject that. I reject that because I think -- I reject that because I believe that the rules of engagement for businesses and business leaders and citizens have changed. I am not going to go there as to what’s going on in the backdrop of America today with regard to politics, but I think in view of the dysfunction and polarization we have a greater responsibility to do more.
I am also here to tell you that all those cynics and people who criticize whether or not these initiatives are right for our Company and many of whom have said these programs are dilutive to your ability to make money or they’re dilutive to shareholder value. I can tell you unequivocally that is wrong, it has been accretive to our financial performance. It has been accretive to attract and retain great people and it is accretive to most important aspects of the 40 plus years of the foundation of Starbucks and that is our culture, our values and our guiding principles.
Now it's added to the relevancy of the brand because we’re showing up in places that we haven’t shown up before and maybe we’re surprising people and introducing Starbucks to new ways of things that we’re doing. And as a result of that, the relevancy and the power and the impressions of the brand are in great-great numbers. And every now and then something happens with regard to the relevancy of the brand that surprises us. So, it's amazing I just pick up a red cup and you know what I am going to say.
Is that crazy, just a red cup. Now that resulted in 8 billion impressions in social media. And here is how crazy Wall Street is sometimes the stock went down that week because people had convinced themselves that we were going to have a bad holiday. And as you know, we had a record Christmas quarter. So the real question which I can’t answer today is, what color is the cup going to be next Christmas? You have to wait for that.
Okay, speaking about relevancy, these are some of the stores we opened recently, now some of these names you probably can’t pronounce but look there is one common theme at these openings, there is one flying out the door with anticipation, the reputation, the quality of the coffee. What Starbucks needs in all of these different places because of the iconic nature of what we have built, so here you have a line out the door in Kazakhstan, and just a mile away from here you have a line at the pipelay store. And this has taken over the weekend so how could it be that in King County we have 200 stores within driving, walking, why they are on line in all of these places, and I think that clearly speaks to what we as a company have built and at its core, at its core it is the third place, it is the sense of community, it is the intimacy between our people and our customers. And I think our relevancy as a company has grown through the years as people are longing for human connection, a place they can trust and rely on and a brand I think that speaks not only to ringing the register but speaks to their own values and they understand what it is we're trying to do as a company.
So speaking of pipelays and how iconic that is, as many of you know a year ago we opened a spectacular store, I have no news about the Roastery today but I couldn't do the meeting and not show the photo. I just I love this store so much I just had to give it its due today. So a few weeks ago we made a pretty grand announcement, an announcement that probably has been coming for many-many years given the fact that in 1983 as a young man, I was walking the streets of Milan and Verona and had the epiphany of what coffee could be in America. So after all these years we made an announcement in Milan last week, two weeks ago that we are finally going to open our first store and it's going to be a spectacular flagship in the first quarter of 2017 in Milan and it was such a special, thank you, it was such a special emotional moment that we documented it and we want to share it with you. So here is our announcement in Italy.
Well you are all invited to the opening. We’d pay for it but it would dilute shareholder value. We have a number of friends here from Italy but we do have one person I want to recognize and that is Michael Percassi and that is our partner in Italy, I don't know where Michael is, so Michael please stand up, where are you Michael?
So six years ago, we recruited a fantastic person to our Board, he came with fantastic leadership qualities, experience, a real skill base in terms of technology, he was the CEO of Juniper Networks, prior to that he was one of the senior leaders of Microsoft, he has been now with the company for one year as President and Chief Operating Officer, he is a true servant leader he is making me better every day. Please welcome, Kevin Johnson.
God see Howard. Well good morning. It's a pleasure to be here. I got up this morning and I was reflecting on the fact that this is my eighth annual shareholder meeting since joining the Board of Directors, but it's my first annual shareholders meeting as an opportunity to present to you as a member of the senior leadership team. Now, I've seen Starbucks evolve, since my first meeting in March of 2009, certainly at the beginning of the decade much of the focus of the company was around transformation, basically stabilizing the business getting back to the fundamentals. Then we transitioned into this era of growth, several acquisitions came along, Evolution Fresh, Teavana, La Boulange I would characterize the last two years, as ones of being very focused on a crisp strategy and driving execution. So over the next 40 minutes or so, I want to share some observations and the key theme for 2015 and that key theme is really elevating the Starbucks brand.
Now I want to start by bridging to some of Howard's comments about our financial performance. Now, with my first meeting in March of 2009, we had approximately 16,000 stores, we just generated about $9.8 billion in revenue. You roll forward today nearly 24,000 stores, $19.2 billion in revenue. In that period of time, the store count has nearly doubled, the revenue has nearly doubled and in March of 2009, the stock price when adjusted for the stock split was approximately $5.50. Today we're hovering around $59 a share, a tenfold increase in the stock price. Clearly a significant performance over that period, and 2015 was no different. 2015 was a record year of revenue. 2015 represented a record year of operating income, earnings per share there was also a record in terms of the amount of cash returned to our shareholders, $2.4 billion in cash, returned to shareholders through buybacks and dividends, fantastic performance in 2015.
And that performance really quite requires all of our business segments to be contributing. Now this work was really driven by the great work with more than 300,000 partners around the world who are working to bring Starbucks to life and elevate the brand on a global basis. Now 2015 was a period where we elevated the brand across three key critical businesses, our retail business, our channel development business and digital. So, let's start by taking a look at our retail business with the largest segment, the Americas segment. Americas segment represents a significant portion of the revenue and profitability of the company with nearly 15,000 stores throughout North America and Latin America.
Much of the growth in the Americas is driven by the increase in same-store sales. Our team in the Americas drove amazing performance in 2015 by increasing same-store sales by 7% over 2014 and in addition, they opened new markets in Panama and Bolivia. They continue to drive that growth agenda, Europe, Middle East and Africa very important market. Our business in EMEA has been very focused on achieving the right balance between our company operated markets and our licensed market, now that rebalancing is paying off as evidenced by the growth in operating income. In addition, we opened a new market in Azerbaijan and we're very excited about entering the markets in South Africa and Italy this year.
China, Asia Pacific represents significant growth for the company, now I visited China and Japan three weeks ago, and certainly the enthusiasm for these markets is very strong. In 2015, we accelerated our growth in Japan, following the acquisition that transitioned Japan to a company operated market. In China we now have more than 2,000 stores across 100 cities and the talent and passion of our partners in China as evidenced here today is amazing.
Now certainly across our retail businesses we are serving up to 90 million customer occasions a week. And Starbucks retail sets the stage for that brand experience on a global basis. Now as I travel the world I have come to observe I think there is four key pillars that all have to come together to create that special Starbucks experience. Great partners who are able to connect with our customers, beautiful stores that are designed to reflect the brand, innovative offerings in our beverage line up and in our food and certainly premium coffee, the highest quality coffee in the world.
Now let's explore each of these pillars in a little bit more detail. I'll start with our partners. With over 300,000 partners around the world who wear the green apron their knowledge and passion for coffee comes across and it comes across in their ability to connect with customers. And I see it everywhere I am sure many of us see it when we walk into our home Starbucks store and we know the Baristas by name, and they know us by name, they know our favorite beverages. Well I see it when I travel to Amsterdam for example. One of our partners Barista hosted a wonderful coffee tasting for me and several customers in the store. He told a story about this coffee from Ethiopia how is a natural processed coffee and how through the natural processing it became a very fruit forward flavor notes and he paired it with blueberries. And they created this wonderful moment in the discussions amongst the Barista and the customers and myself about coffee our like journeys and we really enjoyed the opportunity to learn a bit and interact with one another.
In Beijing similar story I was being hosted for a coffee tasting in one of our stores in Beijing, sitting at the bar and this Baristas shared his life story with us and his journey that brought him to Starbucks he was preparing the coffee I turned around and I looked and there were about 30 customers standing behind me with their cell phones out doing a video recording of this young Barista sharing a coffee tasting with us. Connecting with those customers and in many ways what our partners bring to life in our stores is critical. But then having beautiful stores that create the stage for our Barista's to practice their craft is also very critical. In many ways that comes down to designs in our stores that are unique, interesting and represent the brand.
Now I've learned a lot this past year working with our store development team on a recent trip to New York I walked the streets of Manhattan, with our real estate team and I learned a lot about the real estate decisions and they shared with me the way that we have refined and improved the analytical tools that we use to select the right real estate and put the stores in these wonderful locations.
We've expanded the store portfolio this year, with a lighter range of store formats in the same trip I walked down the street in Wall Street we visited the Express Store, our Express Store format is a smaller footprint of reduced food menu and it's all driven by in those locations where we have high foot traffic and we want to create an experience of convenience for those customers. Now our store development team is very thoughtful about how they leverage the different store types in a marketplace to create that experience. Now certainly the designers come to play and everything matters. Our designers of stores they pay attention to everything, the materials, the textures, the color pallets, the furniture, the pastry cases, the lighting and the music overhead. All of that comes together to create the stage for Barista to practice their crafts. And then we compliment that with innovations around beverage and food.
In 2015 we introduced the Flat White an espresso forward beverage that became a very popular hit. Following the introduction of the Flat White we saw our special category grow the fastest it's grown in the last three years. We then complimented that with our Cold Brew a new platform that's been accepted by customers to great reception. And just last week in the Roastery we've introduced Nitro Infused Cold Brew continued innovation around the coffee platform.
Our Teavana shaken iced teas have become very popular and we sold nearly $1 billion of Teavana in our Starbucks stores throughout the U.S. last year. Our cold beverages are complimenting our hot beverage line up and then we come in with food innovation. The morning day part has grown in many ways by complimenting our beverage line up with breakfast sandwiches that have grown 34% year-on-year. Our lunch, salads, sandwiches, wraps, Bistro Boxes up 40% year-on-year so certainly innovation in beverage food is creating new occasions for our customers. And then at the core of these four pillars is our coffee. Coffee is core to our brand and so our focus on our work in coffee starts with sourcing. We source coffee from more than 300,000 farmers, small and large lots. Let's take a look at one of these farms.
Now this farm is in Costa Rica. Hacienda Alsacia is this one farm that Starbucks owns and it's where we do our work around agronomy and farm innovation and it's this work around agronomy and farm innovation at Hacienda Alsacia that's enabling us to support coffee farmers around the world. Today we operate seven, soon to be eight farmer support centers that are helping farmers with agronomy as well as financial support through a farmer loan program. We source over 99% of our coffee using Coffee and Farmer Equity Practices, C.A.F.E. Practices. C.A.F.E. Practices are really focused on ensuring sustainable, quality coffee and they also address the economic, the social and the environmental aspects of the coffee business. This is all about sustainable ethical sourcing.
Coffee is at our core, and we continue to focus on it, we're also bridging from coffee to really then focus on a new category around tea. Now the addressable market for tea is $125 billion addressable market. With Teavana acquisition, Teavana establishes our premium tea brand. As I mentioned last year at Starbucks retail in the U.S. we sold approximately $1 billion of Teavana teas. We are now taking Teavana to our Starbucks retail in Europe and Asia in 2016. We have also piloted a new Teavana specialty retail concept that really is focused on enabling customers to explore and discover the world of teas, really working to create an immersive tea experience.
Now across all of our retail segments in 2015 the team really delivered and you think about setting that brand in 24,000 stores around the world is job one. But then you think about the opportunities we have to extend that into channel development. Our channel development business today has over 1 million points of presence. So, if we are serving nearly 90 million customers in our Starbucks retail, those same customers have an opportunity to interact with the brand outside of Starbucks. These points of presence may include things like grocery, mass merchants, hospitality and fine dining and strategically it's very important that we represent our brand at each of those touch points. This was also a record year for our channel development team and I'd like to invite Michael Conway who leads our channel development business to join me on stage and share some of the great that they're doing in channels. Mike?
Good morning. I'd like to share how channel development elevates Starbucks in millions of occasions outside of our stores. We do this by delivering high quality Arabica coffee and the right products in the right formats for our customers to connect with each other where they live, work and play. Now I've led channel development for three years now and I've had the honor of partnering with some of the worlds' most recognized and iconic brands. And whatever experience it's been both humbling and consistent. When I meet with them it's clear that we're not just another supplier. This deep respect for who we are for our brands and what we stand for and I feel such incredible pride in representing Starbucks in these situations.
And I think it stems from the deep connection that our Baristas make with our customers each and every day. And I feel a deep responsibility to ensure that you'll find an elevated Starbucks experience as part of your daily routine. So, we're at work, you may find us in the break rooms of companies like Microsoft and Google, while travelling you'll find us in hotels, in airports and even on airplanes through our partnerships with the Marriott Corporation, Delta Air Lines and Alaska Airlines. You'll find us on the campus of some of the nations' most prestigious colleges and universities like Notre Dame, Arizona State University and our own Hometown University of Washington.
Few channels like these we deliver over 4 million cups of coffee daily generating sales growth three times that the pace of the industry. Starbucks is also available when you want to enjoy coffee at home. In the U.S. there are over 1.3 billion cups of coffee enjoyed each week primarily purchased in the grocery out where Starbucks is the number one brand of premium roasting ground and K-Cup. When you’re grocery shopping you may even find our signature isles.
Now our signature isles incorporates features from our retail stores, so you’ve gotten warm lighting deep wood trend and of course that green siren that has lit calling people down the center of the isle and calling people to shop in the coffee isle. Not only has this increased sales for Starbucks and the category but importantly it's elevated the shopping experience for our customer and also enhanced the in-store image for our grocery partners. Now while we’ve established significant reach across many channels our future growth will be achieved through two key pillars, ready to drink growth in international markets and single served category leadership.
Ready to drink coffee is a major growth opportunity for Starbucks that started over 20 years ago in partnership with PepsiCo. Our business today has grown to more than $1.5 billion in retail sales and we are the number eight brand in liquid refreshment beverages ahead of brands like Powerade and Sprite. As we continue to bring category leading innovation to the market, I am proud to announce that this summer Starbucks will launch our ready to drink cold brew coffee. It's a premium smooth tasting beverage that delivers craft cold brew on the go.
Now the success of our ready to drink business in the U.S. led us to markets outside of the U.S. where the love for Starbucks is strong and we’re able to link closely with our local stores for product inspiration. Let's start with China where you saw earlier in this meeting that it's a very important meeting for Starbucks. Last year, on this stage, I shared our plan to accelerate our ready to drink business by unlocking local manufacturing and distribution in partnership with Tinggi, one of China’s leading food and beverage manufacturers.
And starting in May, Starbucks will expand from a regional to a national business, achieving distribution in nearly every major city in China. With this increased presence in China, our long standing presence in Japan and Korea and our expansion throughout Southeast Asia we are well positioned for growth within the cap regions. Let's look at the EMEA market where we’ve recently launched in six Middle East markets and we’re experiencing significant ready to drink growth. Throughout the rest of this region, our portfolio will be inspired by customer favorites by Caffè Americano with milk which is launching next month.
And finally, let's turn to Latin America where last summer we announced a distribution agreement with PepsiCo. By the end of this year, we will expand from four markets to 10 markets and nearly double the number of locations for our products can be found and enjoyed. It's through these new partnerships and through product innovations more customers and more countries will enjoy Starbucks no matter where they are.
Now, let's turn to single serve. Across the globe more customers are making coffee at home with their single serve brewers. Our aspiration is to become the leading player in the $8 billion single serve category. In the U.S. Starbucks has already achieved the number one brand position last year and is growing nearly twice the rate of the total K-Cup category. Now to ensure that we continue to meet the needs of millions of Starbucks customers for K-Cups I am pleased to announce that we have extended our agreement with Keurig Green Mountain to continue as a supplier of Starbucks K-Cup pods. This will enable us to go faster and deeper into channels beyond grocery and it will give us greater flexibility in driving product innovation.
Consistent with our track record of bringing of category of innovation, this summer we will introduce an entirely new platform, the Starbucks Caffè Latte in K-Cups. We will bring customer favorites like caramel, vanilla and mocha and this fall we’ll introduce two seasonal favorites pumpkin spiced latte and peppermint mocha. Now while K-Cup is a leading single-serve solution in the U.S., there are different single-serve platforms that are winning in other regions. Our strategy is to participate and win on leading brewer platforms in each region. I am pleased to share the European launch of Starbucks Espresso Capsules compatible with Nespresso.
This summer both in the UK and France customers will find our Starbucks Espresso Capsules in our stores online and where groceries are sold. And this is just the beginning. Our next focus will be Asia where our vast store footprint combined with the strength of the Starbucks brand uniquely positions us to win in this region. This strength in Asia combined with our number one position in the U.S. and our upcoming launch in Europe is why we believe we are well positioned to be the global leader in single serve coffee. So as you can see, from single serve to ready-to-drink from the U.S. to China from the hotel lobby to the grocery isle, we are elevating Starbucks by taking inspiration from our stores and bringing high quality innovative products to our customer around the world. Channel development, these are customers a reason outside of our stores to connect with each other, inspire each other one cup at a time where they live, work and play. Thank you.
While we talk to you about elevating our brand at retail, elevating our brand through channel development, clearly technology is playing a bigger and bigger role at Starbucks. Certainly we are leveraging technology to engage customers support our partners and our stores and to manage our multibillion dollar supply chain. Today we reach tens of millions of customers digitally. We have innovated in many different ways to bring technology to life both in our stores and on the go. We pioneered many new innovations and many in the industry are following. It's our intension to stay a step or two ahead of the competitors, and this is why we hired the first Chief Technology Officer in the history of Starbucks, Gerri joined from the Adobe Systems after a long carrier with the Tech Industry in Silicon Valley, so please join me in welcoming our first CTO of Starbucks, Gerri Martin-Flickinger, Gerri?
Thank you, Kevin. Good morning, it is an honor to be part of the Starbucks team and have the opportunity to spend a few minutes with you this morning. I joined Starbucks about four months ago and I joined for two very simple reasons. First and foremost, Starbucks is a brand I admire greatly. I have been a long time stand and a long time Latte drinker. But secondly, it's so very important to me is the technology I believe can enhance human connection and at its core Starbucks is all about the human connection. One customer and one cup of coffee at a time, and I truly believe technology can enhance and enrich these human touch points every single day.
So like many new Starbucks employees, I had the opportunity in my first few weeks to go to some stores and be behind the bar and learn about serving our customers. And despite seeing that Starbucks is just an amazing place, I also discovered it was an amazing place to work. Not only did I see partners and Baristas working hard to connect with our customers every day, but I also saw them supporting each other in interesting ways and powerful ways every day.
One of those ways was through something we call the cup fund the cup fund is a partner contributed fund to help employees with a short-term, near-term emergencies. So I arrived at the store during the holiday season. And I noticed that every time a partner would purchase a product from the counter, they had the opportunity to round their purchase up to the nearest dollar and contribute to the cup fund and it was really just nickels and dimes at a time. So you are probably wondering why am I telling you this story besides trying to impress upon you that Starbucks has very kind and generous people working here.
Well, really simply, technology is what made that contribution model possible. The idea for the cup fund round up came from technology partners in Starbucks, who had encoded point of sales system to allow that function to occur. It became such an immediate and engaging way for our employees to donate very small amounts of money all the time, the contributions overnight doubled. And within three months the fund had $0.5 million in it just from round up.
So that is technology behind a human connection. So I would like to share with you a few thoughts on technology trends that are happening now and how they are shaping Starbucks today and in the future. And let me start with the Internet of things. And this concept is very familiar to all of you, when you drive your car today, you notice navigation, you notice the map will show you where your next gas station is and many of you have cars where the software the firmware is actually automatically updated from the manufacturers. Well, today's retail store is also becoming hyper connected and way we’ve never seen before.
For example, at Starbucks a warming oven are actually updated over the Internet, so that when we introduce a new food product to the store, it would be warmed exactly the same wherever you are just perfectly. We also have our Clover net machines that are part of a proprietary technology called Clover that, which updates them remotely with the brewing standards for every single origin and type of coffee. So when your Barista brews on any machine anywhere it’s just right delivering both the quality and the consistency that our customers deserve.
So we end up knowing through the Internet of Things, what is working in a store, how well it’s working, how much it’s working and how to make it work better. But let me turn your attention to another important trend, which is data. All of these Internet of Things devices generate a lot of data with about 90 million transactions a week, we know a lot about what people are buying, where they’re buying, how they’re buying and if we combine this information with other data like weather promotions, inventory insight into local events, we can actually deliver better personalized service to our customers.
We can optimize inventory, we can minimize waste. We can find better ways to serve our customers and our Baristas can improve their productivity, so that they can spend more time with the customers. And this really brings me to the third trend, which is customer experience. Today, customers have a very high expectation of the digital customer experience. And last year Starbucks did an amazing job delivering a best in class mobile order and pay application. But the journey is just, I love that. But honestly, the journey has just begun. I want you to imagine with me some other opportunities that these trends can unlock.
Imagine you’re on a road trip, driving across the country and you pull into a Starbucks drive to that you’ve never been before. We detect that you’re a loyal customer and you buy about the same things every day at about the same time. So as you pull up to the order screen, we show you your order and the Barista welcomes you by name. We also show you your favorite treat in a picture at the same time. Does that sound crazy, no, actually not really, in the coming months and years, you will see us continue to deliver on the basic aspirations to deliver technology that enhances the human connection, again it is my honor to be part of this team and I am delighted to be on this journey with you, please welcome Kevin back to the stage to talk more about exciting innovations.
Well, thank you, Gerri. So suddenly Gerri is adding value to the company already in the short period of time. She talked a little bit about what we’re doing in our stores and certainly, we are extending that in-store Starbucks experience to a magical digital experience. A little bit of background on the journey. In 2001, we introduced the first gift cards that people would buy in our stores. Now this last holiday season, one in six American adult received a Starbucks gift card for holiday, these are becoming very popular.
When the iPhone launched in 2007, it made the mobile Internet a reality. So we followed up in 2009 with an idea of taking those gift cards and enabling them to be loyalty cards. Enabling a customer to basically register that card, reload it and every time they use that card, they’d earn stars, stars to be redeemed for a reward.
In 2011, we took the physical gift card and we built a version on the mobile app for a virtual digital loyalty card. The digital agenda came front and center for our customers in 2011. Today, we have over 70 million active users of the mobile app on a global basis, that’s up 35% year-on-year. Over 21% of all transactions in our stores in the United States were paid for using this mobile app, certainly on this journey we extended this mobile app to include the mobile ordered pay and the pilots we’re doing around delivery in New York City in Seattle.
Now this loyalty and digital platform has become a foundation for the next phase of our journey. It’s become flywheel in the case of customers earn loyalty points, they redeem those points in Starbucks and it’s facilitated by this digital experience. Now, we’re going to announce a set of things to now enhance that digital experience in three dimensions. We’re now opening a new rewards program that we shared with the market last month and it will be effective on April 12th. In addition to that new Starbucks rewards programs, we’re introducing new services, new services through partnerships that we announced with companies like Spotify, New York Times and Lift.
And in addition, we’re bringing customers to the world of stars everywhere. So let’s walk through each of these three things. Our rewards program, we announced our new rewards program last month and really the intent behind it was to level the playing field for our customers, taking into account how often they visit and how much they spend. Customers will now receive two stars for every dollar spent at Starbucks, certainly at Teavana, at our Evolution Fresh stores. This change also sets the stage for customers to earn stars outside of Starbucks.
Now since announcing the changes last month we have had over a half a million new customers sign up for Starbucks' Rewards. The sign ups on Starbucks' Rewards have accelerated since making this announcement. In addition we now have 12 million active users of the Starbucks' Reward program in the United States, people who use this on a very frequent basis. Now this new Starbucks' Rewards program launches on April 12th. And in addition to the new rewards program on April 12th we're going to also introduce to our customers a new mobile app experience.
Let me just take you through the new mobile app experience. Now we'll start with a view that's familiar to all of us, this is the current mobile app, now on April 12th that new user experience that we show right here will transform. Let's take a look at what the new experience will look like. Now you'll see many things that are familiar and you'll start to see some things that are new. Let's zoom in at the top of this mobile experience to give you a flavor. Right away we tell you the number of stars that you've earned front and center. 127 stars earned. In fact in the middle the fact that that gold star it is filled in it means that I have a reward that I could redeem, and you'll see on the little circle bar around it we're starting to fill in for every star you earn a little bit of a gauge on how close you are to your next reward.
Now we have kept a number of things familiar for you, we have kept for our customers the whole navigation bar at the top. So if you know how to pay, store locator, give gifts, mobile order and pay and engage with Spotify that stays the same. But we've now enabled a whole new set of experiences, a whole new set of services to be delivered on this iPhone on this mobile app. So now if you look at the mobile app and you click we now have a set of cards, and this card deck you can scroll up and down vertically. Now for example there's a card here that has the photograph of the nice croissant in a special offer. This particular card is the card that will deliver personalized offers to me the customer. These personalized offers are coming from our personalization engine, where we look at your preferences, we look at your patterns, and we try and recommend things in our offers that are relevant to you.
So you as a customer start to have a more immersive, a more relevant experience for your engagement with Starbucks. Now if you scroll down a bit, I'll show you how some of these new services come to life, so if you click on the phone you'll scroll down and you'll see the New York Times, in our relationship with the New York Times for our Starbucks reward members on the mobile app we're going to have some curated articles and some free content that's produced by the New York Times that will come to life in this mobile app. We're also then going to have the opportunity for customers who want to subscribe to the New York Times digital subscription or the regular subscriptions have an opportunity to then connect that subscription to the Rewards program. So every time they pay for their New York Times subscription they earn stars, just like we had done with Spotify.
Now if you scroll back up we'll have a little bit of fun in terms of looking at the stars that we have available. And I think if you click on the stars, people love the cup and the love to shake the cup around and see the stars just flow around, well you're going to have a much larger constellation of stars floating in your cup and so we have some new surprises for you. I'll just show you one fun little thing. If you take your finger and you touch on the cup, your finger actually becomes a little magnet and you can start to have that constellation of stars follow your finger around in the cup, hours of entertainment. There is some other magical little surprises, I'm not going to share them with you today. I'm sure as users of this mobile app our customers will discover them once we launch this.
But you'll notice when I look at the number of stars and I have a reward it shows me that I have an opportunity to redeem that reward. So let's click down there and you'll see when I click on redeem that reward I have two choices, it says I can redeem that reward in Starbucks or I can use mobile order and pay for the first time ever we are enabling mobile order and pay, you can redeem a reward through mobile order and pay starting April 12th, so let's click on redeem this reward ahead of time using the app and we go right into the familiar mobile order and pay user experience.
Now you will notice it has my previous order, my Flat White, my croissants that I love, certainly that's going to stay. We're going to start to enhance mobile order and pay with more features, personalized to you, your favorite orders, your favorite stores, recommendations. Well let's go ahead and just click on my previous order, continue, and you'll notice it's got my regular order, it's got a recommended store, let's go ahead and continue we'll click on that. Then ask me to confirm, are you sure you're driving by this store, it's going to be ready pretty soon, so let's select that store. And then finally before I order, I also notice it's telling me I have an offer that I could redeem. That too is the new capability. Let's take a look at this offer before I place my order just to make sure, and you see this is an offer for 20% off of croissant. I'm going to save that just so that I can see what happens when I redeem my reward using Mobile Order and Pay. So, let's cancel and let's go ahead and redeem that reward using Mobile Order and Pay. Nice, little Starbucks occurs. So, those are just some of the new things we are doing in our new mobile app. What do you think?
Now, in addition to the enhancements we're making in the mobile app to provide these new services, in addition to the rewards program, I sit around thinking, wouldn't it be nice, if we all had a payment card that would enable you to earn Starbuck stars for every dollar spent using that card. Now, if this card were accepted virtually anywhere, this could become your primary card for shopping, for travel, for online spending. Now, think about the number of stars and rewards you could earn, it’s stars everywhere. I don't know of such a card until today. Today, we are announcing a new payment platform in partnership with JPMorgan Chase that's coming by the end of this year. This is a prepaid, reloadable card, accepted anywhere visa [ph] is accepted, making it virtually -- accepted virtually anywhere. Every time you use this card, you will automatically earn rewards, stars will deposit right into your account, and this is just the beginning. We intend to open up our digital ecosystem and extend it to more payment options. The new card, we’ll have more information in the next couple of months on where you can sign up and how this works but this is a first of this kind. What do you think?
Okay. Taking you through all the work that we're doing to elevate the brand, fiscal year ‘15 was a record year. We're elevating the brand at retail, nearly 24,000 stores, reaching nearly 90 million customers a week. We're elevating our brand to the channels with 1 million points of presence, and we're elevating our brand our digitally.
Whilst we focus on the future of Starbucks, our mission statement guides us every step of the way, to inspire and nurture, the human spirit, one person, one cup, one neighborhood at a time. When you look at this mission statement, and for me, I feel a great sense of responsibility. I feel responsibility to our partners, to our customers, to our shareholders. I feel responsibility in the people we serve.
Now, this is highlighted to me on a recent trip to Costa Rica. I had the opportunity to visit some farms in hills of Costa Rica. One of the farms we visited on a warm sunny afternoon, it was a farm, it was a multigenerational farm, we met that farm, meet the grandfather, he was there with his son and his 7 or 8-year old grandson had just returned from school. And on that warm, sunny day in Costa Rica, we walked up the hills through the coffee trees. We stood amongst those trees as the grandfather told the family story. This was a fourth generation coffee farm. He was the fourth generation to run that farm. And as the grandfather told a story, I watched this young boy. This young boy stood there with such pride in the coffee trees to hear his grandfather tell the story, proud of his farm, proud of his family. I watched his father, gently grates his arm over the shoulder of this young boy.
This is a family, they pour their hearts into it. And we feel a great sense of responsibility at Starbucks to represent their coffee and every other coffee farm around the world that grows these wonderful coffees to represent these coffees in the most special way we can. And that's why I'm proud of the work we're doing in support of coffee farmers around the world. Our One Tree for Every Bag Commitment is just one example. For every bag of coffee we sell, we are donating one coffee tree to farmers. And these coffee trees are special, hybrids, rust resistant coffee trees. And I think about for every one of those trees we donate, I think about that young boy and his family, as we're on track to donate 20 million trees to farmers by the end of this year. Thank you.
I struggled for weeks to find the right words to express the pain I feel about where America is headed in the cloud hanging over the American people. There are moments when I’ve hard time recognizing who we are and who we are becoming. We are facing a test, not only of our character but of our morality as the people. It's a crusoe world [ph] of our lives and those of our children. There is still photos and the video we share are profoundly said and yet when we hear the heartfelt words of Robert Kennedy were all comforted. The 1968 on the night of the assassination of Martin Luther King Jr., he stood on the back of a flatbed truck in Indianapolis with no notes and comforted an entire nation. We all long for that kind of leadership and those heartfelt words more than any other time in our collective lives.
In 1960, as a young boy, my mom took me by the hand and we walked for what seemed like miles to a rally. A presidential candidate was making a rare campaign appearance in the Brooklyn that I lived in. And we got to the rally, there must have been thousands of people there. As a young boy, I could not see over their heads but I heard the voice and the words of John F. Kennedy. As he spoke, I could feel the grip of my mother's hands tightened around mine. As I stood and looked up to her, I could still see the glow on her face. She felt as if he was speaking to her. His vision for America’s future was optimistic, even for those of us who stay tuned and live, was to live in public housing and hold blue collar jobs. She believed her family's future and her children's future were linked to that American drink because of the faith and confidence she had in the leadership that he presented. And I stand here before you as living proof of that American drink.
Two years ago at this very meeting, I spoke about the problems in America and the lack of leadership that we all were witnessing. And I framed the important question, what is the role and responsibility of a poor profit company during these times. Unfortunately in the two years that have followed, the dysfunction and the polarization has worsened. Broken promises, void of truth and leadership have led to a fractioning of trust and confidence, not only in our elected officials but in our institutions. I've always viewed the American dream as a reservoir, and it has constantly been replenished with values, work ethics [ph] and the spirit of the American people. But sadly, our reservoir is running dry, depleted by cynicism, despair, division, exclusion, fear, and yes indifference. And in my view, all wrapped up in fool’s gold. Given what it -- what's that stayed, I humbly today pose a different question and that is what is the role and responsibility of all of us as citizens.
We must do everything we can to reclaim and re-imagine the American dream and fill the reservoir back up not with cynicism but with optimism, not with the despair but with possibility, not with division, but with unity, not with exclusion but with inclusion, not with fear but with compassion, not with indifference but with love.
It's not about the choice we make every four years, it's about the choices we are making every day. I've shared this story with some of you before but I believe it's worth repeating. It's my sage rabbi and the lesson he taught me about humanity. That's what happened during the holocaust. As we all know, men and women and children were transported in the worst possible conditions by a railcar. That journey took two or three days at times. People were sandwiched in like sardines. That journey two, three days, no air, no water, no bathroom, when they arrived at the camps in the cold, cold winter months, men were separated from women, women from children and one person for every six was given a blanket. And that person who received the blanket had to decide; am I going to keep this blanket for myself or am I going to share with others? And the lesson in humanity was that most people did share it with others.
Given what's going on in the world, as I stand here before you, I ask you today to share your blanket with others, regardless of the color of their skin, regardless of their religion, regardless of their gender, regardless of their sexual orientation, regardless of their station in life or their politics. Let's fill our reservoir back up with a true promise of our country. And once again, embrace what it means to the Americans. Thank you very much.
Okay. Well, we have a long history of amazing musical performances and I must tell you I've kept this secret as best I can and I believe that today is no exception. And I know you're going to go crazy. Our performer is an activist, an advocate, and a true global citizen. She is the co-founder of Keep a Child Alive and We Are Here Movement. She has won 15 Grammys, 15. She is one of the most beautiful and important voices of our time and she's someone who shares her blanket every single day. She's not ready yet. This is literally the hardest part of the whole thing. What I'm going to say or do to fill in the time? I do like Kevin's presentation? Okay, that only took one minute. So, let me do this one more time because I think it's important.
We wanted to not only have an extraordinary performer today given the messages we try to share with you and I think the values that we all know we need, we didn't only want a Grammy winner, we wanted an extraordinary human being. Ladies and gentlemen, please welcome my friend Alicia Keys.
Thank you so much. Thank you so much to Howard for being such a visionary, such an incredible leader, a person who really not only talks about it but is about it. Thank you so much for being a Company that we can stand behind. Thank you for really wanting to know that in a world where so much is happening and so many issues, there are so many issues in it is so much to change it, is so much that has to be different that takes a struggle that takes people, compassionate people like you and like me to really care about it. So, I am very, very proud to be here today with you. I am very proud to stand for something with you, to stand with Howard about something incredible about the world. So, this is our world, this is our world, this is our lives, these are our children, this is our chance to decide who we want to be and why we are here. So, thank you so much for having me here with you today, even though you didn’t know it.
Yes, I wanted to play you something that I haven't played many times before. But I think it's important. I think we all know.
Thank you so much. I heard you singing out there. I know you’re believers.
Unidentified Company Representative
Ladies and gentlemen, please welcome Executive Vice President, General Counsel and Secretary, Lucy Helm.
Good morning, ladies and gentlemen. My name is Lucy Helm and I'm a proud 16-year Starbucks partner. I am here today to present the formal part of the meeting. You've seen Chinese drummers, beautiful videos, red cut comedy, dancing stars, numbers dreams of Italy, incredible beautiful musical talent and inspiring words of a passionate Chairman and CEO. But I know this is what you've been waiting for, shareholder proposals, director nominations and voting tabulations.
I promise that in 10 minutes, you'll have the opportunity for a question-and-answer section with Howard and Kevin. But for now, let's take care of business. Before we begin with the shareholder proposals, detailed in the proxy statement, it is my honor and privilege to introduce the nominees for the Starbucks Board of Directors. If I could ask all of the Board members here today to please stand. Mr. Howard Schultz, our Chairman and Chief Executive Officer; Mr. Kevin R. Johnson, our President and Chief Operating Officer; Senator William W. Bradley, Managing Director, Allen & Company; Mary N. Dillon, Chief Executive Officer of Ulta Salon, Cosmetics & Fragrance Inc.; Secretary Robert M. Gates, Former United States Secretary of Defense; Ms. Mellody Hobson, President, Ariel Investments; Mr. Joshua Cooper Ramo, Vice Chairman, Kissinger Associates; Mr. James G. Shennan Jr., General Partner Emeritus, Trinity Ventures; Ms. Clara Shih, Chief Executive Officer of Hearsay Social; Mr. Javier G. Teruel, retired Vice Chairman of Colgate-Palmolive Company; Mr. Myrone E. Ullman III, Executive Chairman, J.C. Penney Company; and Mr. Craig E. Weatherup, retired Chief Executive Officer, PepsiCo.
I'd also like to introduce Andrew Wilcox, representing Broadbridge Financial Solutions. Mr. Wilcox has been appointed in sector of elections to tabulate the votes today. Thank you, Andrew. We've received and affidavit signed by Broadbridge Financial Solutions that notice of this meeting along with the related proxy and annual report materials was mailed or made available on/or about January 25, 2016 to each Starbucks’ shareholder of record as of the close of business on the record date of January 14, 2016. Based on that affidavit, this meeting is duly called with timely and proper notice. In addition, based on the information provided to me by Mr. Wilcox, a quorum of shareholders is present to conduct our meeting today.
Please note that a list of shareholders as of the record date is available for inspection by shareholders at the Investor Relations table which is located in the grand lobby behind this auditorium. The polls for the matters to be voted on today are now open. The polls will close immediately after I present the maters to be voted on at this meeting, and if you are a shareholder of record as of January 14, 2016 and have not voted or you wish to change your vote, you should deliver your ballot now to the Investor Relations table in the grand lobby in the back.
We now proceed with the six shareholder proposals detailed in the proxy statement for this annual meeting. Because no notices were submitted within the advance notice portion of our bylaws, no nomination or proposals other than those appearing in the proxy statement will be presented today. The matters to be considered here are all described in that proxy statement.
The first order of business is the election of the director nominees as nominated by the Board, the people that I just introduced. The Board recommends a vote for each of those nominees. The second item of business is the approval an advisory resolution on executive compensation. The Board recommends a vote for this proposal. The third item of business is the approval of the amended and restated executive management bonus plan. The Board recommends a vote for this proposal. The fourth item of business is a ratification of the selection of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the current fiscal year ending October 2, 2016. The Board recommends a vote for this proposal. There are two items in which we will have speakers. The fifth item of business is the shareholder proposal in supporting statement submitted by Mr. John Harington regarding proxy access. I would now like to recognize, Ms. Valerie Reuther, [ph] a representative of Mr. Harington for a period of three minutes. Ms. Reuther, would you please come to the microphone?
Unidentified Company Representative
Thank you, Lucy. Good morning. As Lucy said, my name is Valerie Reuther. I'm a Starbucks shareholder and have been since it went public. And I today represent John Harrington and his clients of Harrington Investments Inc. out of Napa, California. John holds 1,000 shares of Starbucks and his clients a total of 41,000 shares. The proposal is asking our fellow shareholders and the Board of Directors to enact proxy access, so that all of us as shareholders, owners of this corporation can have the ability to nominate directors to our company forward. Currently only the Board of Directors can nominate directors including themselves. This means we can only vote for one slate of nominees who are self-selected, self-perpetuating and self-compensated. This is not a democratic process but an authoritarian one, similar to one-party state. We, the legal owners, can’t select our legal agents. It seems like such wonderful attention today; it seems like there is a lot more than one-party state. Having the ability to nominate some directors will make our Company more responsive to its shareholders, provide better board representation, enhance fiduciary responsibility, and improve corporate accountability. Proxy access is supported by TIAA-CREF, which manages $851 billion; the Council of Institutional Shareholders representing a less than $3 trillion in the union and corporate benefit funds endowment and the endowment -- excuse me, the California Public Employees’ Retirement System and Institutional Shareholder Services among other institutional investors. I ask for your vote on this modest proposal today for proxy access. Thank you.
Thank you, Ms. Reuther. Respectfully, the Board recommends a vote against this proposal for the reasons set forth in the Company's proxy statement.
So, last item of business is the shareholder proposal in supporting statement submitted by the National Center for Public Policy Research regarding human rights review. I'd now like to recognize, Mr. Justin Danhof, a representative of the National Center for Public Policy Research for a period of three minutes. Mr. Danhof, would you please begin?
Thank you, Lucy. As Lucy said, my name is Justin Danholf, I’m General Counsel of the National Center for Public Policy Research, and I rise to move our proposal.
Our proposal is very simply. It asks the Company to protect its workers, known as its partners, from potential discrimination. Many in the room may recall that in 2014, the CEO of the tech company, Mozilla, a gentleman by the name of Brendan Eich was forced from his job because he had contributed to 2008 California referendum. In fact, approximately half of American workers can legally face workplace discipline or termination for engaging in political activity outside of work. In light of this, we submitted proposals to Starbucks and over 30 other corporations, asking them to voluntarily protect their employees’ right to engage in legal political and civic activities during their off hours without fear of any potential retribution on the job. Almost all the corporations that we approached engaged with us and over a dozen of major corporations adopted this policy. This includes Pepsi, Time Warner, Wal-Mart and General Electric. However, Starbucks for some reason did not engage with us at all. Free speech and free association are under increasing intact in America. Some politicians want to regulate speech by broadcast journalists. Collages all across this country are erecting so called free speech zones that despite the name limit speech. Just look at what happened last fall at the University of Missouri. And now this trend is entering corporate America.
While Mr. Eich and others have been run off the job simply for their political believes, other corporations such as Facebook and Twitter are actively limiting political speech. It's not hard to envision a scenario in which conservative or libertarian Starbucks employee might feel ostracized with the point of reducing her political activity. The Company has a reputation whether it's deserved or not of being very left-leaning. CEO Schultz is a prominent American liberal who [indiscernible] who were unhappy with their choices had hoped would run for President. If the conservative employees direct superiors also left-leaning, she might feel compel the squash or political activity.
Now to be clear, the current culture is predominantly anticonservative but our proposal would also protect a liberal employee who is working under a conservative or libertarian bond. The facts are simple. In the current political climate, there is a totalitarian effort to silent certain speech. Starbucks employees may curve their political activity out of the very real rational fear of retribution network. While the Company's executive team may think this would never happen, it can't be certain unless it accepts firm policy to protect its workers. Please join me in supporting our proposal and supporting Starbucks workers. Thank you.
Thank you, Mr. Danhof. Respectfully, the Board recommends a vote against this proposal for the reasons set forth in the Company's proxy statement.
That concludes the matters to be voted on as outlined in the notice of annual meeting. Because no other proposals were submitted within the advanced notice period in our bylaws, no other business matters are in ordering.
Therefore in accordance with our bylaws at this time, I here declare the polls for voting at our 2016 annual meeting to be closed. Ladies and gentlemen, I've received the preliminary tabulation for Mr. Wilcox and based upon that tabulation, all of the director nominees were elected; each of the management proposals were approved; the shareholder proxy access proposal was approved and the shareholder proposal regarding human rights review was not approved. The final result of all these proposals will be reported on a Form 8-K within four business days of this meeting.
This concludes the formal business. And I now declare that formal meeting to be adjourned. I'll now turn the meeting over to Howard and Kevin for the Q&A session. Remember that any shareholder who does not have an opportunity to ask a question during the time today, may submit their question by going to the Investor Relations table on the grand lobby and completing a comment card, and we'll get back to you.
A - Howard Schultz
We're happy to open it up to any questions that you may have.
This meeting and last year's meeting is very inspiring to me. Howard your leadership is very inspiring to me, the heart of what you bring to this company and the focus on human connection. I want to speak to you about my own experience at Cleveland, Ohio. In the last few years what's happened is my local Starbucks has moved to a drive through and then mobile, pay and go or order and pay and even the setting has taken away this third place buyer, with headphones on. And the sense of human connection I feel in my own neighborhood has been lost. And I'm wondering, it's great all the technology but I'm wondering why don’t we as a company have regional ambassadors like the onward counsel, people that are focused on bringing faster human connection the way you experience in Italy, the way a cafe has always been about bringing the neighborhoods together. So, I'd like to ask you what advances have we made on that neighborhood level and what would you really like to do especially this year, where so much is at stake and there's such contention in neighborhoods.
I think it's an important question on a number of levels. I think what we've tried to do with technology and maybe in your specific store, not so well, is to enhance the experience. But let me just take a step back from that response. We have thousands of stores in the U.S. and I think over the last year or so, we realized that there's an opportunity to segment those stores based primarily on the need to-date of the customer or the community and maybe in your case, we haven’t gotten it right. And what I mean by that is that a Starbucks store is open anywhere from 5:30 in the morning till 10:00 at night and there are different need stakes that a customer has at 7:00 am versus 4:00 in afternoon. As an example, most people in the morning pretty much want Starbucks to be very fast and we're trying to leverage technology to do that.
The drive through stores that have been part of the growth of the company for the last number of years have been hugely successful because we're filling a customer need that most people perhaps don’t want to get out of their car and want us to be as convenient as possible. I think what we're trying to do more than anything else is to create balance with the kind of stores we're designing, the kind of real estate we're selecting. And I think in terms of your overall question about the issue of space in the country and Starbucks rolling it, I think clearly our stores are in almost in every community in America, and they could facilitate the kind of conversation that perhaps we're not having, as Americans. That’s one of the reasons why we just engaged with TurboVote to try and get as many people who work for Starbucks to register to vote. And we probably are going to try and do that with our customers as well.
I understand your question; it's not a simple answer. I think you'd be surprised how often we're having conversations like this ourselves to ensure the fact that in no way should technology dilute the integrity of what has really created Starbucks, which is the intimacy of that experience and the sense of community. So, it’s a delicate balance. We don’t always get it right; perhaps we didn’t get it right in your store. But I can promise you and assure you, we are really focused on this with great level of sensitivity. Thank you.
As a very brief follow up, just who what I speak to do kind of a pilot project in my region about human connection engagement during this cycle of election, who would I speak to in the Company to experiment and see what's possible?
Well, he is going to hate me for this but Vivek Varma. I didn’t mean it about you but that’s…
Vivek will love speaking to me. [Multiple Speakers]
He is here waiting. Vivek Varma.
Vivek, let's find each other.
Hi, Howard; it’s Howard Katz [ph]again. And remember that last year I spoke about the ability of gluten-free food, right? I want to thank you and I want to thank Katie Seawell [ph] for the progress being made and for the 19% of the people who cannot eat gluten free food, it's coming to Starbucks in abundance.
Thank you very much.
And then I have a suggestion. We were looking at the K-Cups. And also you were showing us waiting online, people waiting online. Well, I hate waiting online at Starbucks. So, my suggestion is that we put the K-Cups availability in Starbuck stores, so that can make my -- brew my own K-Cup.
Yes. They are available; may not to the blend that you want but…
That’s what I’m saying, make all the blends available, and I can taste the ones I haven’t tasted. And I think we will not only go out and have to wait online, I can make my own coffee and enjoy it that way. So, thank you.
Thank you very much.
Good morning. Howard, have you ever heard of a manatee?
Have you heard of Crystal River Florida, home of the manatees?
No, I have not. Sorry.
Well if you haven’t been there, please add Crystal River to your bucket list. We are listed in the book of 1,000 places to visit before you die.
Unidentified Company Representative
That's not your question though.
No, the question is coming but I have to read this because I am too nervous. The national and international media for television and press have discovered us, our beautiful natural rainwaters and especially Three Sisters and the manatees. We are small city and a major growth for. We are water leveraged paradise. We are a Main Street USA, a Tree City USA, building of river walks, will have an aquarium in the next few years and most importantly, you know where this is going, right?
You want a store?
Yes. We have a hundreds -- we have hundreds of thousands of national and international visitors. We have a major highway going through town and these people are looking for Starbucks. We don't want a coffee store selling Starbucks coffee. We want a Starbucks store selling Starbucks.
Okay. I think Andy Adams who is in the audience. He's a friend of Vivek Varma. And Andy is your guide, Andy Adams. Andy, raise your hand. Right there; that's your guy. Thank you very much; home of manatees.
My name is Lee Albertson, [ph] a long time shareholder. And I want to thank you and your team for putting on a very inspiring annual meeting. You do so every year. The lines keep getting longer and longer to get in. A year ago, I was here talking about your app and you have this new app that's coming out and it looks very exciting. I'm a Windows guy, and I have Windows 10 and I have a Windows 10 PC, had…
I know where this is going; I know where it is going.
And so my question is, does the new app support Windows 10?
Well, first of all thanks for your question. I remember the question last year. And the team has been hard at work in partnership with Microsoft. And I think we are within 30 days, 30 to 45 days of releasing Windows phone app. So, you should be able to use all these features on your Windows phone. The Windows app will not be working in manatees. I'm kidding. Go ahead.
Hi. My name is Aaron; I have been a partner for about a year and a half. I'm a coffee master, and I'm now at Capitol Hill. I live in 24 in Pike Street. My question is about C.A.F.E Practices and all of the works that the Company does for farms all over the world and for sourcing. It's actually why we don't have as much publicity about the C.A.F.E. Practices and the work we do as we could, because I know a lot of people assume large company means poor practices. And I'm curious as to the decision making behind choosing not to publicize as much of that information?
The C.A.F.E. Practices are a very important part of our ethical sustainable sourcing initiatives and we realize that we have an opportunity to do a better job telling our story. And so, work that Craig Russell who runs coffee in partnership with Sharon, our Chief Marketing Officer, have put together a new website called 1912 Pike. The video that I showed you was from that website on 1912 Pike, where we've got a full collection of information to help educate customers about what we do with coffee, how we source it, where it comes from, different brew methods. And so, your feedback is certainly recognized, it is something we could do a better job off, and we're investing to tell our story in a much more broad and visible way.
Hello. I'm just honored to be here. I've been a stockholder since you went public and a daily Starbucks customer until about a year and a half ago when my local lovely store in Old Town, Tacoma you remodeled. And again, now the whole vibe and ambience of the place is missing. There is one small round table in the center of the room and otherwise very -- one table, there's just no place to sit and cozy in with small tables, and just humbly if you could bring back small tables again?
What specific store was that did you say?
It's the Old Town in Tacoma, just above the Old Town waterfront, the Chinese reconciliation park, it's -- you've been there for 20 years, since you opened it. And I’ve been going daily in that store, it's about a year ago, but now I'm retired, I want to have my cup of coffee and enjoy it at the table and there's no…
Give us 30 days or so and we will do everything we can to try and bring back those…
I so appreciate it, because I so miss my local store. Thank you.
So, I think between Cliff and Charles [ph] and Andy, I'm sure we could fix that.
Hi. My name is Tory Cruickshank [ph] and I struggled to hearing how this Company has portrayed compared to what I experienced. I'm the 13-year partner that wrote to you about being fired on my birthday because I misread my schedule. I was three years away from retirement age and benefits, I never got a response. To this day, people ask me if I'm still downtown, meaning East Holly Starbucks in Bellingham store number 9679. It will be two years -- I opened the store, it will be two years and three days, it's just pretty devastating to be fired on your birthday after 13 years of dedication.
I think it takes a lot of courage to come here and share that story. So, thank you for that. I don’t recall the email, and I don’t know the specific story. But if you wait for after the meeting, someone from the HR side of Starbucks will sit down with you and will find out exactly what happened. I don’t -- I am not in a position to respond because I don’t really know what happened but we will sit with you today and sort it out. If Adrian is here and obviously Scott Pitasky, if you would -- thank you.
Hi. I am Jamie; I am a one-year partner, as of today actually. And so, this is my first meeting and it's been very inspiring and I really like what I hear. And I had a question regarding channel development, and seeing how we’re planning to expand our single-serve beverage options, especially K-Cups. And I am wondering since we’re planning on becoming the leaders, leading supplier of K-Cups through Green Mountain and Keurig, what do you plan to do as a Company to reduce the waste of K-Cup?
Well, certainly, on many of the single-serve brewing systems, the design of the pods that go in them are not necessarily environmentally friendly. I think there have been some steps but probably not enough, some steps where they make bio-degradable components that go into those pods that often times they require to be reassembled. I think the opportunity we have is to continue to innovate in this category. This category is not going away. I think the number of brewing systems and the experience that customers like single-serve is here to stay. I think our role is to stay. I think our role is in partnership with Keurig Green Mountain and with Nespresso for other platforms that we happen to be on is to be a good contributor of innovation and ideas to help move those to a more sustainable way. And I think the industry overall has worked to do in that area. And we intend to help contribute to that.
My name is Betty Locke [ph]. First, I want to congratulate you for finally opening, a store in Fallbrook, California. I really appreciate that. And a couple of years ago, I contacted the Company because we didn’t have one at the McDonalds was closed up, and it would have been a perfect location. But those people who owned that property refused to sell it to anybody, anything to do with food or drink. So, now you’ve opened one up right across from the new McDonalds, which I am very happy about. But my question is about the flourless chocolate cookie; it was my very favorite thing. I always wanted one when I went in with my crate. [Ph] And now it's been discontinued they tell me. I travel a lot and every place I’ve gone, I’d asked the one and most places don’t have it anymore. And it's chocolate and everybody loves chocolate. Not only that, if flourless, it's probably gluten-free. So, if you call it a gluten-free cookie, it would probably be popular?
Well, thank you very much for your story and your feedback. Certainly, the snacks that we offer in the stores, is an area where we’ve been focused and we bring in different snacks and depending on how well those sell across stores, I know our team is constantly either bringing a new or pruning the portfolio a bit. Perhaps, if Mesh is here who runs that business, perhaps after this meeting, we could connect with you and get…
One more thing, it was lower calories than almost anything you’ve said, which is good.
Okay. Well and I think, you have got some good ideas for Mesh on how to market those cookies as well. So, thank you.
Unidentified Company Representative
I think we will take two more questions, please. Two more.
So, my name is Sarah Bowen, [Ph] I am a shareholder for about 19 years.
Thank you very much.
Thank you. And I look at Safeway and I had my favorite coffee drink made by one of my favorite brews. And I said to her, hey I am going to go to the meeting tomorrow, any concerns, questions you wanted to pose, and one question came up. And the question was, can you please ask the head honchos [ph] to Howard, why the company allows a person to go to a store A and then drive a few miles and get a refill for $0.55 because the company is making a lot, and the girls are not happy? So I wanted to take an answer back from you to them?
You’re asking about the resell policy?
Yes. So someone would go to store A…
Bring their coffee, bring the empty cup and say, refill please.
Well, have you heard the old that the customers always right? So, I think what we try and do more often than not is do everything we can to say yes.
That’s what I was thinking, but I wanted to hear from you.
Yes. So, I think that’s worked out pretty well for us by…
I’ll bring it back.
Yes, trying to strike; so, if people want to take advantage of the system, we kind of look the other way.
I understand. And that’s what I was thinking, but I didn’t want to say that. I wanted you to say it.
Okay, thank you. Okay I think there is two people there, so we’ll use for the last two questions; go ahead.
Hello, my name is Darien; I’ve been a partner for about a year and eight months.
I wanted to ask you a question about talks in city council, king council about the scheduling issues that partners have been having. I see now after coming here and being underdressed and things drums that you have so much to think about global market, expanding products, expanding and innovating, and I can understand how an issue like this might fall to the wayside. But I am here to ask you, first, if it’s something you are considering; it’s something you’re seeing; something you’re looking at. And secondly if it’s something that partners like me, people who see the effects, the direct effects of scheduling could talk to you about it. Because you said yourself that the barrier for being a helpful company is profit. And I honestly do believe that an investment in scheduling and consideration would result in profit, it would result in customer satisfaction and ultimately make Starbucks and the communities they help a better place. So, is it something that Starbucks is considering?
Not only is it something we are considering, but I think it’s at the top of our list to try and create some balance between the pressure that exists on some people who are having a difficult time with the schedule and our ability to schedule thousands of people. And I think what we now know is that we need a specific technology tool and technology resources to do this well. And so, first to our, of all the things that we have collectively to deal with, there is nothing more important at any time other than the partner experience with Starbucks. Having said that, there are lots of issues that we are dealing with 300,000 people all over the world, it’s not an excuse. And I think some of the issues are some people want part time hours, because they have other things they’ve been doing beside Starbucks, either a second job or going to school or working whatever they’re doing. And so Starbucks stills that need. Then we have other people who only want full time hours and we’re trying to satisfy that. And then you need the primary issue is making sure that we provide you with the schedule in advance, so that you don’t have a short-term response and you can’t make work.
We understand the issues; we think they’re critical. And I can promise you on behalf of all of us at Starbucks, we are digging in on this and trying to solve it. We’ve made strides, and I think in the near-term, they will be a technology tool that we will have and our store manager will have that will give us more visibility on the issue in advance, and we’ll have the problem solved. But the short answer is and I think this is important, of all the things you see here, nothing is more important to anyone in the company than experience our partners are having; full stop.
I really do appreciate that and I honestly believe you. I’ve spoken to a software specialist, spoken to local legislators, as team how it affects people throughout this sector and the one voice, I really feel is missing are the partners themselves, the employees. I think they have a lot of useful things to say and I think if you let them, they’ll talk a lot.
Okay. Thank you very much for that. Thank you. You have the last question of the annual meeting.
Very exciting. I am six-year partner; my name is Ashley. [Ph] And my question is around education. I first off want to thank you and the senior leadership team for all the strides that you’ve made ASU in making education available to partners. I had the pleasure of working my way through college while in the stores as a Starbucks partner. But during that time, we didn’t have the great programs that we have now. So my question is what are our plans since we’re such innovative leaders around signal [ph] partners, who have that mounting student debt and who want to further their education but aren’t able to because of that undergraduate that.
Are you asking whether or not Starbucks would try and help students with the current debt that they have?
Whatever our plans might be, I’m serious, if we’ve looked into assisting those long-term partners, who did mount lots and lots of debt just to continue their education and continue further their career and contribute to Starbucks?
Have you taken advantage of ASU?
I graduated before that.
No, no; listen. With the trillion dollars of debt over sitting on the backs of American young students, it would be quite difficult for Starbucks Coffee Company to try and absorb levels of debt that our partners may have. I think what we’re trying to do is try and address that in other ways by creating more opportunities for compensation and total compensation in the areas of cash and benefits and all the things that we are trying to do. You are asking a question that is facing millions of young people. This is a question that I think sits on the burden of the United States government. And what I’d love to see myself is some degree of legislation in which congress and the President would address this issue. But I think it's not really possible. And I would be misleading you, if in any way I indicate that Starbucks Coffee Company could in some way take the burden of the debt of our students, of our partners. So, I am sorry if that’s not the answer you want. We are looking at ways to extend ASU and college benefit to family members. We just did that for veterans and their spouses. And I think in the future, I hope that we’ll have some kind of graduate degree as well. But, this is a complicated issue.
Thank you very much. So that wraps up our meeting. I think we’re right on schedule. We thank you for hanging in with us. I hope that you took away the message we’re trying to send about the growth and development of the company and most importantly, the values and guiding principles of Starbucks. Thank you so much. Thank you.
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