"But its British subsidiary, at first glance, appears to be doing less
well. Last week, it announced its first ever profits in Britain—of just
£1m ($1.54m)—in spite of having first set up in the country in 1998 and
now having 791 outlets. Analysts say that seems odd in a country that
has been crazy about caffeinated beverages since the 17th century and
now spends £1.45 billion in coffee shops each year, according to Mintel,
a market-research firm.

The main reason why S*******s has run persistent losses is not due to a
lack of interest in its coffee, but to minimise its tax bill. In fact,
S*******s’ operating profits are only slightly less in Britain than
America. In 2012, it made £70m on £414m of sales of frappuccinos,
espresso coffees and the like. However, it also made administrative
losses and royalty payments totalling £98m, enabling the division to
declare a £30m loss. It is via these payments that the firm has been
able to transfer its British profits to its Dutch subsidiary, which is
charged lower rates of tax."

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