How Starbucks Was Able To Win Over China

Summary

Starbucks, a global coffee giant, has found immense success in China, the world's largest tea-producing country, by adapting to local culture and tastes. With over 6,000 stores in more than 230 cities, the company is expanding rapidly, aiming to reach 9,000 stores by 2025. Despite challenges like high prices and COVID-19 restrictions, Starbucks has maintained its premium market position, leveraging strong digital initiatives and strategic partnerships. The brand's focus on family, community, and status resonates with China's upper middle class, positioning it as a status symbol and a hub for socialization.

Takeaways

• 🌏 Starbucks has a significant global presence with over 34,000 stores in 80 countries.
• 🏠 In 1999, Starbucks entered the Chinese market, the world's largest tea-producing country, with its first store in Beijing.
• 📈 Starbucks operates more than 6,000 stores in over 230 cities in China, making it the company's second-largest market after the U.S.
• ⏰ Rapid expansion in China has led to a new store opening approximately every nine hours, with plans to reach 9,000 stores by 2025.
• 🍵 Initially, Starbucks adapted to the local culture by offering a variety of tea drinks and even Chinese tea to assimilate into the tea-drinking culture.
• 🤝 The company built rapport with Communist Party officials and entered China through licensing agreements and partnerships.
• 🏢 In 2017, Starbucks bought out its joint venture partner, marking a significant step in its growth strategy in China.
• 📱 Starbucks has a strong digital presence in China, with 90% of its 7 million loyalty members actively engaged via its app.
• 💰 Despite high prices relative to China's GDP per capita, Starbucks has positioned itself as a status symbol and premium brand.
• 🍽️ The company has localized its menu to fit regional tastes, offering Shanghai specialties, Beijing specialties, and other regional favorites.
• 📉 However, Starbucks faced a sales plunge in China due to strict COVID-19 restrictions and lockdowns in 2022.

Q & A

How many Starbucks stores are there worldwide?

There are over 34,000 Starbucks stores in 80 countries.

In what year did Starbucks first open in China?

Starbucks first opened in China in 1999.

What is the current number of Starbucks stores in China?

Starbucks operates more than 6,000 stores in over 230 cities in the Chinese mainland.

What is the growth rate of Starbucks stores in China?

Starbucks is expanding rapidly in China, with a store opening every nine hours.

What is Starbucks' plan for expansion in China by 2025?

Starbucks plans to increase the amount of stores in China to 9,000 by 2025.

How did Starbucks initially approach the Chinese market?

Starbucks initially did not focus on coffee but assimilated into the tea house culture by offering a wide variety of tea drinks and even Chinese tea.

What was the initial reaction to Starbucks entering the Chinese market?

The initial reaction was skepticism, with many believing that the tea-drinking culture in China would not embrace coffee.

How did Starbucks build rapport with the Chinese government?

Part of Starbucks' strategy was to build a rapport with Communist Party officials, and they operated in China through a combination of licensed and joint venture business partnerships.

What is unique about Starbucks' operations in China compared to North America?

In China, 100% of Starbucks stores are company-operated, compared to 59% in North America.

How does Starbucks' loyalty program perform in China?

Ninety percent of its seven million loyalty members in China are actively engaged via Starbucks's app for mobile ordering.

What is the significance of the Starbucks Reserve Roastery in Shanghai?

The Starbucks Reserve Roastery in Shanghai is the first fully immersive coffee experience in Asia and represents a significant part of Starbucks' growth strategy.

How has Starbucks adapted its menu to local tastes in China?

Starbucks has localized its menu to fit local tastes, offering regional specialties such as Shanghai, Beijing, and Chongqing favorites in different stores.

What challenges has Starbucks faced in China due to the COVID-19 pandemic?

Strict COVID-19 restrictions and lockdowns in China caused Starbucks' same-store sales in China to sink 44% and 16% in the third and fourth quarter of 2022, respectively.

What is the current market share of Starbucks in China's coffee market?

As of 2020, Starbucks held 36.4% of China's over 11 billion dollar coffee market.

What is the biggest threat to Starbucks in China according to experts?

The biggest threat to Starbucks in China is a beverage company called Haiti, which has successfully copied Starbucks' model for tea.

What are Starbucks' plans for digital innovation in China?

Starbucks is investing 220 million in launching its digital and Technology Innovation Center in China to further digitize store operations.