Starbucks targets major growth in China

15 April 2010

BEIJING: Starbucks, the coffee house chain, is planning to open "thousands of stores" in China in the future, as part of a broader plan to strengthen its position in Asia Pacific.

China, India and Vietnam will be among the company's main target markets going forward, according to Howard Schultz, its ceo.

"We are still at the embryonic stages of what Asia will be for the company," he said. "Asia clearly represents the most significant growth opportunity on a go-forward basis."

Starbucks currently runs 376 outlets in China, the first of which was opened in Beijing in 1999, but it is making no assumptions about the likelihood of its success in the country.

"Cracking the code in China for any company is not an easy task – there will be a number of winners and lots of losers of people who go there and rush to judgment and don't succeed," said Schulz.

"The thing I am most interested in when I go to China is whether or not local Chinese are buying Starbucks coffee and sitting in our stores."

Japan is currently Starbucks' second-largest market outside of the US, but the recession has exerted a major impact on the trading conditions faced by its 878 stores operating in this market.

Its total sales in Japan are estimated to have been flat in the 2009/10 fiscal year, at ¥96.4bn ($1.0bn; £667m; €757m).

While operating profits rose by 12% to ¥6.1bn in this period, this was largely due to cost-cutting.

Responding to these difficult financial conditions, the firm launched a successful promotion with the retailer Sazaby League in January 2010, which has since been extended until August.

As part of this promotion, customers are offered a cut-price cup of Starbucks' coffee provided that they bought a drink at full price earlier the same day.

The company's Japanese like-for-like sales rose for the first time for more than a year in February, and it intends to add an extra 50 or 60 stores to its network in the country in 2010.

Despite Starbucks' ambitious targets in Asia Pacific, Schultz suggested that the sort of stringent financial management employed in Japan would be used to inform its regional and global strategy.

"Personally, I am leaning toward taking that learning and discipline to the international market," he said.

Data sourced from Wall Street Journal; additional content by Warc staff