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Starbucks pushes for major China expansion

News, 31 July 2017
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SHANGHAI: Starbucks, the global coffee house chain, is to invest $1.3bn in China, its fastest-growing market outside of the US, as it aims to grow the number of stores it operates in the country to 5,000.

The company currently operates 2,800 stores, including 600 in Shanghai alone, and its latest investment will see it take full ownership of some 1,300 Starbucks stores in Shanghai and Jiangsu and Zhejiang provinces.

Announcing the deal ahead of publication of its quarterly earnings last week, Starbucks revealed that it will acquire the remaining 50% share of its East China business from long-time partners, Uni-President Enterprises Corporation (UPEC) and President Chain Store Corporation (PCSC).

It represents the largest single acquisition in the company’s history and reflects the confidence Starbucks has in China as a growth market. According to its Q3 results, same-store sales in China rose 7% compared with 5% in the US.

Meanwhile, UPEC and PCSC will acquire Starbucks’ 50% stake in President Starbucks Coffee Taiwan Ltd for $175m, giving the companies full control of approximately 410 stores in Taiwan.

Commenting on the initiative, Starbucks President and CEO Kevin Johnson, said: “Unifying the Starbucks business under a full company-operated structure in China, reinforces our commitment to the market and is a firm demonstration of our confidence in the current local leadership team as we aim to grow from 2,800 to more than 5,000 stores by 2021.

“Similar to our decision in 2011 to fully license our Hong Kong and Macau market operations, we are pleased to transition our business in the Taiwan market to our long-time partners Uni-President Enterprises Corporation and President Chain Store Corporation, both highly-recognized local operators, as we continue to grow in Taiwan.

“This is a critical next-step as we advance our multifaceted China growth strategy for long-term profitable growth in Asia.”

The announcement came as Starbucks revealed overall net income fell 8.3% to $691.6m for the third quarter ended July 2nd.

The 16,302 cafes in Starbucks' US-dominated Americas region contributed $974.8m in operating income over the quarter, while the 7,183 cafes from the China/Asia Pacific region posted $223.8m.

Data sourced from Starbucks, Reuters; additional content by WARC staff

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