Starbucks and PepsiCo Sign Distribution Agreement for Ethos Water

SEATTLE, WA and PURCHASE, NY: June 8, 2006 – Starbucks Coffee Company (Nasdaq: SBUX) and PepsiCo (NYSE: PEP) through their joint-venture partnership, the North American Coffee Partnership, announced today the signing of a distribution agreement for Ethos(tm) water. The agreement will significantly increase distribution of Ethos water to retail stores in the U.S. and Canada, and demonstrates Starbucks and Pepsi’s commitment to Ethos Water’s unique and innovative business model, fully integrating a social conscience into all aspects of the Ethos brand. Further, by continuing to make a $0.05 donation for each bottle of Ethos water sold in all distribution channels, both companies are affirming Starbucks contribution goal set last year of at least $10 million by the end of 2010 to help children and their communities around the world get clean drinking water.

As part of the agreement, the North American Coffee Partnership will assume responsibility for the co-packing, distribution and marketing of Ethos products in the U.S. and Canada. PepsiCo will utilize its resources, customer insights and knowledge of the water category to increase the reach of the brand outside of the Starbucks retail store environment. Currently, Ethos water is available at more than 5,000 Starbucks stores and several smaller local retailers in the U.S. Plans are in place to expand distribution of Ethos water by late 2007 with additional bottle sizes and case-packs.

“Building upon our very successful and long-term partnership with PepsiCo, we will ultimately increase Ethos Water’s reach to more than 100,000 points of distribution, helping raise awareness of the brand and the severity of the world water crisis,” said Gerry Lopez, president, Starbucks Global Consumer Products. “Ethos Water’s unique business model validates that doing good drives business success.”

“We’re impressed by Ethos Water’s commitment to educating the public about the world water crisis and providing clean water for children and their communities which perfectly complements our company’s values,” said Tracey Doucette, Vice President and General Manager of the North American Coffee Partnership. “By leveraging the strengths of Starbucks and PepsiCo, we look forward to growing the Ethos brand and driving awareness for water issues.”

Ethos Water, founded in 2002 by Peter Thum and Jonathan Greenblatt, and acquired by Starbucks in April 2005, was the idea of Thum based on his personal experience. While working in South Africa in 2000 and 2001, he witnessed, first-hand, people living with the severity of the world water crisis. Ethos was founded as a means to raise awareness and funds to bring clean water to children around the world, under the simple principle “water for water.”

“Since founding Ethos Water, we have been able to announce grants of more than $2 million to clean water-related programs in communities in Honduras, India, Bangladesh, the Democratic Republic of Congo, Ethiopia, Kenya and Indonesia, which are expected to positively affect the lives of thousands of children and their families,” said Peter Thum, Ethos Water founder and vice president of Starbucks Global Consumer Products. “Our agreement with Pepsi is the next step toward our original vision to help children around the world get clean water and to raise awareness of the world water crisis.”

Through the more than 10-year, highly successful joint-venture partnership, the North American Coffee Partnership introduced bottled Starbucks Frappuccino® coffee drinks in 1996 and later, Starbucks DoubleShot® espresso drink in 2002. To date, these Starbucks coffee innovations remain the No. 1 products in their respective segments of the ready-to-drink coffee category in the United States. Additionally, in early 2006, the partnership introduced a new line of Starbucks® Iced Coffee drinks in both regular and light, a light version of Starbucks DoubleShot espresso drink and the first coffee-free bottled Starbucks Frappuccino crème beverage, Strawberries and Crème. Through the North American Coffee Partnership, Starbucks changed the way customers enjoy coffee by making high-quality coffee products available outside of its stores and became the market-maker in the almost non-existent RTD coffee category in the U.S. in the mid-1990’s.

About Starbucks
Through the dedication of our passionate partners (employees), Starbucks Coffee Company has transformed the way people in 37 countries enjoy their coffee, one cup at a time. Starbucks is the premier purveyor of the finest coffee in the world, with more than 11,500 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim. The Company is committed to offering its customers the highest quality coffee and human connection through the Starbucks Experience, while striving to improve the social, environmental and economic well being of its partners, coffee farmers, countries of coffee origin, and the communities which it serves. Through Ethos Water, Starbucks demonstrates its long history of integrating a social conscience into all aspects of its business. The Company surprises and delights its customers by producing and selling bottled Starbucks Frappuccino® coffee drinks, Starbucks DoubleShot® espresso drinks and Starbucks® superpremium ice creams through its joint-venture partnerships, and Starbucks(tm) Coffee and Cream Liqueurs through a marketing and distribution agreement, in other convenient locations outside its retail operations. The Company’s brand portfolio includes superpremium Tazo® teas, Starbucks Hear Music(tm) compact discs, Seattle’s Best Coffee and Torrefazione Italia. These brands’ unique and innovative personalities allow Starbucks to appeal to a broad consumer base.

About PepsiCo
PepsiCo is one of the world’s largest food and beverage companies, with 2005 annual revenues of more than $32 billion. Its principal businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. Its portfolio includes 17 brands that each generates $1 billion or more in annual retail sales.