Starbucks in China push

28 March 2011

BEIJING: Starbucks is seeking to improve its "brand experience" in China and attract the country's increasingly affluent and discerning shoppers.

The company has been trading in China for 12 years, and describes the world's most populous nation as its "second home market."

More specifically, its average Chinese unit volume climbed from $476,000 (€336k; £296) in 2008 to $603,000 in 2010, during which time margins expanded from 10% to 22%, outperforming the US on these terms.

A primary factor contributing to the US operator's progress is the changing preferences of consumers, reflecting broader shifts throughout society.

"In a traditional tea culture, coffee now stands for modern, successful and forward-looking, and Starbucks is place where you can feel confident," Annie Young-Scrivner, Starbucks' global chief marketing officer, said at its annual meeting.

Starbucks has developed its profile organically, and the number of individuals making purchases in stores at least once every 30 days has doubled in the recent past.

"Although we're not in every city across China, and we've spent a very little amount of money on traditional advertising, we're recognised as one of the top 20 brands," Scrivner added.

"When we measure top-of-mind awareness, by the end of last year, it had reached an incredible level of 75%."

Scrivner added that Starbucks aimed to treble its local footprint to 1,500 stores in 90 cities by 2015.

"Our future in China is going to get even brighter. There are over 160 cities with populations of 1m or more," she argued.

"More and more people are moving into tier one, two and three cities. The middle class is going to be more than double by 2025."

Given the pace of these transitions, consumer insights will have to guarantee the needs of shoppers - growing in knowledge of premium hotels, restaurants, apparel brands and travel - are met.

"We know that our customers are very sophisticated. Right now, the best brand experiences are being built in China, for China, particularly in tier one and two cities," said Scrivner.

"We're not just competing with restaurants and cafes. We're competing with the best-of-the-best brand experiences, like Cartier, like Apple, Gucci and also Louis Vuitton."

Further core characteristics of the Chinese audience include a "pressure to succeed", the desire for a better work–life balance, and enthusiasm for understanding about goods and services.

"Stories and company values are starting to matter as much as logos now," said Scrivner.

"You can see why the 'third place' makes so much sense in a country where people are living new lives, and often in new cities."

She added: "We have to make ensure that we continue to elevate our brand and our experience."

The MyStarbucksRewards card was launched in mid-February and already boasts over 80,000 members, while Starbucks' social media fan base has swelled by 250,000 since this date.

Elsewhere, it has adapted many hit products to suit Chinese tastes, such as Chai Tea Lattes, Green Tea Black Sesame Frappuccinos, Black Bean Muffins and Black Sesame Cookies.

Starbucks also sells gift boxes of moon cakes for the annual Autumn Festival, providing flavours like mocha and green tea, with sales growing by 40% year on year, and will roll out the Via packaged coffee brand in April.

Data sourced from Starbucks; additional content by Warc staff