WHY STARBUCKS WILL WIN IN CHINA

SHANGHAI, CHINA Two weeks ago, construction began on a dormant property sitting along a busy
intersection outside my home. From what has been an empty or vacant lot began to bustle and boom with
the noise of construction workers each day welding, building, and destroying the property inside-out.
Two weeks ago it all became clear when the iconic Starbucks logo began glowing green. Every morning
as I commute to work, and each night as I arrive home, I see the that glowing logo beating beside
Subway and Chinas leading cafe, Pacific Coffee. As bold as its beans, Starbucks had slapped yet
another cafe in a famed and popular central location in Shanghai.

What is Starbucks Doing in Asia?

Why Starbucks New Strategy is Impressive

CEO Howard Schultz
In 1971, three students from the University of San Francisco set out to establish a coffee bean business
called Piquod, named after the famous ship in Moby Dick. Within a few years, the students expanded
their business in Seattle and had the company renamed to the Captain of the Piquod, Starbuck. The cofounders sold the rights to founding member Howard Schultz in 1983, and the company quickly began to
expand. By 1992, Starbucks was brewing 2,000,000 beans a year, and went public.
The year is 2008, and Starbucks CEO Jim Donald is facing pressure from years of slow growth and rising
materials prcies and enhanced competition in the coffee market. Founder, Howard Schultz returns to the
post to resume is hole as President and CEO after an 8 year hiatus.

WHY STARBUCKS WILL WIN IN CHINA

Schultz sought to restore the distinctive, Starbucks Experience despite booming expansion across US
and International Chains. Facing rising competition from lower-priced fast food chains such as Dunkin
Donuts and McDonalds, Schultz reformed brought the Starbucks Experience to the forefront of their
expansion strategy that sought to not dilute the company, but to maintain its popularity amongst coffee
drinkers.

Starbucks in China
Recently, Starbucks CEO Schultz announced plans to reposition Starbucks ambitions towards Asian
markets. In a region that sees tea as the #1 most popular drink outside of water, Schultz seeks to turn 1.3
billion tea drinkers into coffee lovers. How will he do this? Is it fathomable to imagine a man who took an 8
year retirement from the company he founded, can exceed its original status as Americas most popular
cafe?
Starbucks success isnt unfamiliar to anyone living outside or inside the States. With 14,000 stores
domestically brewing beans each day, it boasts 6,000+ stores worldwide. Nearly 1,000 in Japan. Over
150 in Thailand. Hundreds across Mexico, and soon 1,500 new stores across mainland China.

WHY STARBUCKS WILL WIN IN CHINA

Balancing Act of Global Expansion

While the future seems set for Starbucks vision and Chinese surround me currently gulping down every
roasted variety on the menu, there are more numbers to consider when understanding Starbucks aims.
With nearly 11,000 stores in the US and less than 7,000 worldwide in 2012, Starbucks faces a steep
balancing act. While the prospects of growth in markets like China seem on-track, the company has
struggled in some nations. In Russia, the largest nation in the world, there are only 56 stores following
disagreements and a Moscow-based lawyers attempts to land rights to the company. In France,
Starbucks has poured significant money into less than 75 stores and has barely even broken even on its
efforts.
In 2012, the company stepped on the gas, intending to launch 1,200 stores the following fiscal year, about
three shops per day in 2012. Less than half of them were in the USA.

Were in the early stages of growth in Asia representing the

fastest and largest retail growth opportunity in the companys
foreseeable future.
- John Culver, President of Starbucks China and Asia Pacific Region

WHY STARBUCKS WILL WIN IN CHINA

Securing Global Coffee Bean Producers in China

YUNNAN, CHINA Starbucks is planning to launch a farmer-support network in Chinas Yunnan region to
assist in the production of cost-efficient coffee beans destined for Asian palettes. Starbucks is poised to
establish an unprecedented stronghold on the coffee market in Asia. By buying out coffee bean producers
in the Yunnan (lit. Low Clouds) province, the company has begun selling popular Asian themed drinks in
its stores.
[youtube height="HEIGHT" width="WIDTH"]http://www.youtube.com/watch?v=BYSiGomkGdg[/youtube]
Even Starbucks largest competitor, TeaVana has been inhaled by the company, securing Starbucks
foothold in a country that is poised to become the second largest coffee market by 2015. For Chinese I
spoke with, they told me that they loved the taste, and that enjoying a drink a Starbucks was in itself, a
social experience and an act of self expression.

Controversy
But what does this all mean for Chinese? Will they buy the bait? The truth is, simply being in, or
purchasing Starbucks itself can be seen as a status symbol in China. Chinese enjoy being seen

WHY STARBUCKS WILL WIN IN CHINA

purchasing and consuming such a luxury coffee brand. Such a status symbol in itself, serves as an
example of the growing classes of wealthier Chinese.

Starbucks Culture
Recent controversy rise as state media reported the outrage of prices in Shanghai overpriced they
argued. Where a Starbucks thermos can go for $12, or a cup may exceed $0.45 the average cost of what
you may find in Chicago, LA, or even New York City.

Starbucks turn to Asia, even with its homegrown elements of producing its unique blend from Chinese
producers is an interesting move in its own right. For a company that has seen sluggish growth as various
obstacles in establishing a world wide brand, it appears to be moving in their favor.
A gentleman wearing a suit and speaking perfect English just asked to borrow my seat as he
accommodates the company of his colleagues for an afternoon meeting over coffee. Im reminded once
again that maybe Im not even in China, but some other conglomeration of absolute-globalization in
Eastern Asia.