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 said.
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.