Will China Embrace Starbucks' Growth?
Nov. 25, 2009- Stephanie Startz
The sun never sets on the Starbucks Empire.Starbucks has its sights set
on China. The ambitious roaster has plans to make the Communist republic
its second home, with the potential for a thousand stores.
Starbucks' current presence is more limited, with only 306 stores in mainland
China. But hopes for growth are allayed by strong 2009 sales, reportedly
double their 2008 earnings.
Starbucks joins a swarm of brands expanding into mainland China as the
economic downturn hampers their business in the US, which has been especially
hard on the coffee retailer. After suffering staggering losses during
the second quarter of 2008, Starbucks was forced to shutter approximately
800 stores, cut other costs and experimented with debranding and brand
extensions, including two instant coffee options: Via and the T-Disc.
Starbucks' US growth prospects remain limited, as lingering recession
continues to thwart consumer spending, leaving international markets as
the only option for dynamic growth.
But the brand faces several challenges in moving into a predominantly
tea-drinking culture. Do Chinese consumers have the desire, and the palate,
for 27-renminbi lattes? Wang Jinlong, chairman of Greater China for Starbucks,
believes Chinese consumers are trending towards coffee consumption, primarily
young people. "Coffee represents change, it represents a new lifestyle
for the young people, our core customers are all very young," Wang
Starbucks has provided no timetable for its China expansion, but promises
a big impact. "It's only a matter of time as China continues to grow
and develops in coffee consumption. It's just going to be a huge, huge
opportunity," Wang said.