Channel DevelopmentWide moat

Starbucks (SBUX) — moat facet

Coffee in supermarkets, sold by Nestlé and PepsiCo, at about half of every dollar in operating income.

Channel Development is Starbucks coffee sold outside Starbucks stores, and it earns more per dollar than anything else the company does. The segment had revenue of $1,871.7 million in fiscal 2025, from $1,769.8 million and $1,893.8 million in the two years before 1, 5% of the company 2. Its operating income was $885.1 million, a 47.3% margin 3.

Channel Development operating income ($m)$967.6mFY2023$925.9mFY2024$885.1mFY2025$751.9m9m FY2026Starbucks Form 10-K FY2025 and 10-Q Q3 fiscal 2026
Three quarters of fiscal 2026 already earned 85% of fiscal 2025's operating income.

It is mostly other companies' work. Nestlé sells Starbucks packaged coffee and foodservice products worldwide under the Global Coffee Alliance, paying Starbucks for product and royalties; ready-to-drink beverages are made and distributed with PepsiCo, Nestlé and others 4. A large part of the profit is Starbucks' share of those partners' earnings: income from equity method investees in the segment was $249.6 million in fiscal 2025 5.

The margin has been high throughout: $967.6 million of operating income in fiscal 2023, a 51.1% margin, and $925.9 million in fiscal 2024, 52.3% 6. It fell to 47.3% in fiscal 2025, mostly as income from equity investees dropped from $297.6 million to $249.6 million 7.

The line's history is the 2018 Nestlé deal, in which Nestlé paid about $7 billion up front for the rights 8; that payment is recognised over forty years, and is covered under The Nestlé Annuity.

The latest quarter was strong. Channel Development revenue was $587.9 million in the June 2026 quarter against $483.8 million, and operating income $306.2 million against $218.4 million 9, a margin of 52.1% 10. Across the nine months revenue was $1,678.4 million and operating income $751.9 million 11.

The segment is small enough that its growth hardly moves Starbucks and profitable enough that its decline would. The number to watch is income from equity investees within it, which is where the PepsiCo partnership shows: falling again would mean the ready-to-drink business, which Starbucks does not control, is losing ground.

Moat trajectory: Widening

Revenue rose to $587.9M in the June 2026 quarter from $483.8M, at a 52.1% margin.

The number that tests this moat
Reported
Channel Development equity-investee income, latest quarter
$55.8M in the June 2026 quarter, from $58.4M

The partners' ready-to-drink business shows here; a further fall would mean the part Starbucks does not control is losing ground.

Source: Starbucks Form 10-Q, Q3 fiscal 2026 ↗
References
  1. ReportedThe segment had revenue of $1,871.7 million in fiscal 2025, from $1,769.8 million and $1,893.8 million in the two years before , 5% of the company .
    Starbucks Form 10-K FY2025 - segment note: revenue, costs and operating income by segment for fiscal 2023-2025; income from equity method investees; the Nestlé Global Coffee Alliance and ready-to-drink partnerships; the approximately $7 billion Nestlé up-front payment — FY2023-FY2025 · publ. November 2025 · source ↗
  2. Moat Explorer calcThe segment had revenue of $1,871.7 million in fiscal 2025, from $1,769.8 million and $1,893.8 million in the two years before , 5% of the company .
    Moat Explorer calculation from Starbucks' Form 10-K FY2025 and Q3 fiscal 2026 Form 10-Q: segment shares and operating margins — FY2023 to Q3 FY2026 · publ. 2026-09-23 · source ↗
  3. ReportedIts operating income was $885.1 million, a 47.3% margin .
    Starbucks Form 10-K FY2025 - segment note: revenue, costs and operating income by segment for fiscal 2023-2025; income from equity method investees; the Nestlé Global Coffee Alliance and ready-to-drink partnerships; the approximately $7 billion Nestlé up-front payment — FY2023-FY2025 · publ. November 2025 · source ↗
  4. ReportedNestlé sells Starbucks packaged coffee and foodservice products worldwide under the Global Coffee Alliance, paying Starbucks for product and royalties; ready-to-drink beverages are made and distributed with PepsiCo, Nestlé and others .
    Starbucks Form 10-K FY2025 - segment note: revenue, costs and operating income by segment for fiscal 2023-2025; income from equity method investees; the Nestlé Global Coffee Alliance and ready-to-drink partnerships; the approximately $7 billion Nestlé up-front payment — FY2023-FY2025 · publ. November 2025 · source ↗
  5. ReportedA large part of the profit is Starbucks' share of those partners' earnings: income from equity method investees in the segment was $249.6 million in fiscal 2025 .
    Starbucks Form 10-K FY2025 - segment note: revenue, costs and operating income by segment for fiscal 2023-2025; income from equity method investees; the Nestlé Global Coffee Alliance and ready-to-drink partnerships; the approximately $7 billion Nestlé up-front payment — FY2023-FY2025 · publ. November 2025 · source ↗
  6. Moat Explorer calcThe margin has been high throughout: $967.6 million of operating income in fiscal 2023, a 51.1% margin, and $925.9 million in fiscal 2024, 52.3% .
    Moat Explorer calculation from Starbucks' Form 10-K FY2025 and Q3 fiscal 2026 Form 10-Q: segment shares and operating margins — FY2023 to Q3 FY2026 · publ. 2026-09-23 · source ↗
  7. ReportedIt fell to 47.3% in fiscal 2025, mostly as income from equity investees dropped from $297.6 million to $249.6 million .
    Starbucks Form 10-K FY2025 - segment note: revenue, costs and operating income by segment for fiscal 2023-2025; income from equity method investees; the Nestlé Global Coffee Alliance and ready-to-drink partnerships; the approximately $7 billion Nestlé up-front payment — FY2023-FY2025 · publ. November 2025 · source ↗
  8. ReportedThe line's history is the 2018 Nestlé deal, in which Nestlé paid about $7 billion up front for the rights ; that payment is recognised over forty years, and is covered under The Nestlé Annuity.
    Starbucks Form 10-K FY2025 - segment note: revenue, costs and operating income by segment for fiscal 2023-2025; income from equity method investees; the Nestlé Global Coffee Alliance and ready-to-drink partnerships; the approximately $7 billion Nestlé up-front payment — FY2023-FY2025 · publ. November 2025 · source ↗
  9. ReportedChannel Development revenue was $587.9 million in the June 2026 quarter against $483.8 million, and operating income $306.2 million against $218.4 million , a margin of 52.1% .
    Starbucks Form 10-Q, quarter ended 28 June 2026 - segment revenue and operating income for the quarter and three quarters; U.S. comparable sales; the China joint venture with Boyu Capital (7,991 stores converted, 40% stake carried at $1.2 billion, $52.5 million of revenue from the joint venture); outlook for the licensed international business — Q3 FY2026 · publ. 29 July 2026 · source ↗
  10. Moat Explorer calcChannel Development revenue was $587.9 million in the June 2026 quarter against $483.8 million, and operating income $306.2 million against $218.4 million , a margin of 52.1% .
    Moat Explorer calculation from Starbucks' Form 10-K FY2025 and Q3 fiscal 2026 Form 10-Q: segment shares and operating margins — FY2023 to Q3 FY2026 · publ. 2026-09-23 · source ↗
  11. ReportedAcross the nine months revenue was $1,678.4 million and operating income $751.9 million .
    Starbucks Form 10-Q, quarter ended 28 June 2026 - segment revenue and operating income for the quarter and three quarters; U.S. comparable sales; the China joint venture with Boyu Capital (7,991 stores converted, 40% stake carried at $1.2 billion, $52.5 million of revenue from the joint venture); outlook for the licensed international business — Q3 FY2026 · publ. 29 July 2026 · source ↗
Sources
Generated September 23, 2026