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COWEN COLLABORATIVE INSIGHTS February 25, 2019 We Would Expect Starbucks To Be First Under Our Active Coverage To Pilot CBD Oil, Though Not In Near Term Plan (Charles) Under our active coverage, we would categorize Starbucks as the most forward thinking with beverage innovation relative to Dunkin’, Tim Hortons and McDonald’s McCafe. Starbucks has launched matcha and nitro cold brew on a widespread basis in recent years, among other wellness-based offerings. During an interview with CNBC last month, Starbucks CEO Kevin Johnson cited no plans to introduce CBD-based beverages in the near term, but did not dismiss the notion of ultimately piloting the ingredient. Despite early traction with craft/independent coffee shops, regulators in several states recently banned CBD as an additive. The dynamics are fluid, likely delaying adoption from major coffee players like Starbucks in the near term. That said, we acknowledge a longer-term opportunity if coffee shops are able to properly measure and disclose the CBD levels in their coffee, as bottled CBD beverages that disclose CBD oil levels in packaging are not restricted under the current ban. Should the regulation of CBD oil as an additive to food/beverage change or craft/ independent coffee shops find a way to comply with the existing regulation, we could envision Starbucks ultimately piloting the ingredient. We believe Starbucks would need to better understand the science behind the ingredient, in addition to the standard evaluation of any new SKU around supply chain availability as well as meeting Starbucks’ high speed of service standards. Furthermore, given Starbucks’ heavy reliance on the drive-thru business at more than 50% of sales and 80%+ of ongoing development, SBUX would need to gain clarity around potential liability this entails around selling cannabis-infused beverages before introduction. We note in 2010, Starbucks launched an Evenings program that sold beer and wine inside of participating restaurants. The initiative ultimately scaled to over 400 locations before the program was terminated in 2017. 74 COWEN.COM HOUSE_OVERSIGHT_024890