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Starbucks booms in China as others waver

News, 03 August 2017
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SHANGHAI: Coffee chain Starbucks is opening 500 new stores a year in China, at a time when other Western brands rethink their China footprint, and the company’s Executive Chairman believes its success stems from adapting to local culture.

Howard Schultz spoke to the New York Times about the company’s strategy just days after the Seattle-founded international reported that it is buying out its longtime Chinese business partners with the aim of operating 5,000 stores in the country.

Schultz said he believes the potential of the Chinese market now overshadows even the company’s home base in the US.

Starbucks is now adding 10,000 new jobs in China every year and already has 600 outlets in Shanghai alone – double the number in New York City.

The company will also open a 30,000 square foot “coffee emporium” in Shanghai that Schultz predicts will have a bigger impact on the city’s consumer economy than the opening of Disneyland in the city.

But Starbucks has faced an uphill battle – not least introducing “coffee culture” to a country known for tea – and found it had to develop a localised approach, including its internal business culture.

In the early days, Schultz said he was keen to import the Starbucks philosophy to employees and customers in China, but he and his team soon realised that to gain the trust of Chinese people, including the authorities, required Starbucks to show it trusted them too.

“The unlock was when we realised it had to be a combination of US and Chinese leaders, and over time a totally dedicated Chinese leadership team led by a Chinese CEO,” he said.

Starbucks has been in China for nearly 20 years, investing heavily, not only in its commercial infrastructure, but in higher wages and better benefits than competitors, which has won the favour of Chinese job hunters and the authorities alike.

Stores offer products using China-grown coffee, while Chinese consumers’ taste for luxury as the country has become richer has also helped.

“The Chinese have consistently over the years had an affinity for Western luxury brands, and I think perhaps we benefited from that,” Schultz said.

But, he added: “The story and the success we have enjoyed is clearly based on the experience that takes place in our stores. It’s not the halo of America.”

Data sourced from New York Times; additional content by WARC staff

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