This summer has been big for the king of the coffee world. After a 9% growth in revenues reported in its Q3 Earnings Call in July 2017, August saw Starbucks’ announce the company’s acquisition of the remaining 50% of its East China join-venture at its Partner Open Forum in Shanghai.
With a comparative growth of 4% globally, and 5% in the Americas and the US, China emerged as the most promising market in the Q3 call, with comparable growth at 7%.
“China represents the most important and exciting opportunity ahead of us,” says executive chairman Howard Schultz, with CEO of Starbucks China Belinda Wong remarking at the forum, “this is the beginning of yet another exciting chapter for Starbucks in China.”
As Chinese markets continue to embrace the Starbucks brand, associating the distinctive logo with cosmopolitan luxury, the company have seized the opportunity, with plans to open 5,000 stores by 2021.
Locked and loaded: Starbucks target China
Striking a deal with long-term joint-venture partners Uni-President Enterprises Corporation (UPEC) and President Chain Store Corporation (PCSC), Starbucks’ recently announced full ownership of 1,300 outlets in the Shanghai, Jiangsu and Zhejiang provinces. This acquisition has led to a total portfolio of 2,800 storefronts across Mainland China for the international café.
At $1.3bn, the trade was the largest single acquisition in the company’s history, and reflects the growing confidence Starbucks has in its largest international market outside the US.
Kevin Johnson, recently appointed Starbucks’ President and CEO, explains the move, saying “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 local leadership team.”
Willy Wonka meets caffeine at Shanghai’s Reserve Roastery
This summer has already witnessed the expansion of e-commerce corporation Amazon into both India and Shanghai markets. With the Chinese municipality known for its tech-savvy population, the area is often cited as the perfect tester-market for companies experimenting with development in Asia.
Starbucks have joined the Shanghai hype, announcing the opening of a second Reserve Roastery on the influential Nanjing Road next month.
“As our first international Roastery, we will take even bolder steps to make this Shanghai location our most stunning store, while making it completely unique and relevant to the Chinese customer,” explains Howard Schultz. “The Starbucks Roastery environment honours coffee innovation as a modern day Willy Wonka experience, where customers are only feet away from the theatre and artistry of our coffee craft.”
Described by the Starbucks newsroom as “one of the city’s latest and most iconic must-visit lifestyle destinations and landmarks,” the Roastery has even received government endorsement. Subsequent to a meeting with Starbucks’ global leaders, Shanghai Jing’an party secretary, An Lusheng and Shanghai Jing’an mayor Lu Xiaodong said, “The new Jing’an is focused on developing high-end commercial sectors, establishing new developmental goals for a modern cosmopolitan city, and encouraging new retail innovations within our district.”
The Shanghai Roastery is to be accompanied by the future opening of several other Reserve Roasteries in global locations, such as Milan and Tokyo in 2018. These Roasteries will serve as the base for Starbucks Reserve stores, which have been described by the company as “a new retail format that will integrate the theatre and romance of the Roastery with the unique experience of the company’s new Italian food partner, Princi.”
Rollback of influence in Taiwan
As Starbucks’ expansion in China presses ahead, the coffee house has decided to relinquish influence in Taiwan. Coinciding with the announcement of acquisitions in China, the company released the news that UPEC and PCSC will assume 100% ownership of Starbucks operations in Taiwan for $175mil.
Starbucks’ joint-venture partners, UPEC and PCSC, are already major players in Taiwan’s foodservice industry. UPEC currently hold the title of the biggest food and beverage manufacturer in Taiwan, with business in China and Southeast Asia. PCSC, with UPEC as its parent company, is the largest convenience store operator in Taiwan.
Likening the move to Starbucks’ 2011 decision to fully license its Hong Kong and Macau operations, Johnson states, “this is a critical next step as we advance our multifaceted China growth strategy for long-term profitable growth in Asia.”
Emily Lewis
