Will Chinese tea drinkers buy coffee? Starbucks is counting on it.(Read article summary)
Starbucks announced Wednesday that it will double its presence in China by opening 5,000 stores across the mainland by 2021.
Will a nation of tea drinkers convert to coffee? Starbucks thinks so. The 45-year-old Seattle-based coffee chain announced Wednesday its plan to open 5,000 stores across mainland China by 2021.
That’s a doubling of its current 2,300 stores in the country today, which stands as Starbucks' #2 market after the United States. Eventually, China is likely to rise to the #1 spot, company founder and CEO Howard Schultz told CNN Money.
"If you look five years ago, most of our business, believe it or not, was expats and tourists in China," Mr. Schultz said. "Today, it's mostly Chinese."
Starbucks opened its first store in China 17 years ago amid dire warnings from Wall Street analysts who predicted that the company would fail in a country with thousands of years of culture centered on tea drinking.
"We had to educate and teach many Chinese about what coffee was – the coffee ritual, what a latte was," Mr. Schultz told CNN. "So in the early years, we did not make money."
Even today, skeptics wonder if it’s wise to expand so aggressively in a country where the economy, the second largest globally, is growing at its slowest pace in a quarter of a century. But, again, Starbucks isn’t deterred by this, likely encouraged by a rising demand for luxury goods, including expensive lattes, among China’s burgeoning middle class.
“We have no intention of slowing down and we remain very optimistic and bullish on the opportunities that Starbucks has in China, both in the short term as well as in the long term,” John Culver, the company’s head of China and the Asia-Pacific region, told Bloomberg in January. The company already is expanding in China by about 500 stores a year.
Despite growing coffee consumption – expected to rise 18 percent between 2014 and 2019 – the tea market in China still dominates. It is almost ten times bigger, though its growth is slowing, as Bloomberg points out.
But Starbucks is serving tea, too. In 2012 it bought Teavana, a line of teas and tea houses. The chain already has seen success with tea in the US; the coffee-maker’s tea business here grew 12 percent last year. Starbucks introduced Teavana in China last month, with a cache of creative flavors to entice a nation of discerning tea drinkers.
“With the rich tea culture here, we couldn’t have beverages that are expected or common, or we could not give consumers that feeling of premiumization and of being different,” Vera Wang, the company's director for product line innovation in China and Asia Pacific, told Bloomberg.
This idea in Asia has translated to tea flavors including black tea with ruby grapefruit and honey, and green tea with aloe and prickly pear.
As far as coffee, Chinese Starbucks has the usual lattes and scones. But, as CNN has reported, there are also more traditional Chinese flavors, including red-bean and green-tea frappuccinos, sausage buns, and mooncakes.