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Starbucks To Do More Than Sell Coffee in China

   Ira Mellman 16 November 2010
   Starbucks CEO Howard Schultz (file photo)

Photo: AP

   Starbucks CEO Howard Schultz (file photo)

   Even  though  China  is  not  traditionally known as a coffee drinking
   country,  the  US coffee company Starbucks is hoping to make the Asian
   country its' second largest market.

   Starbucks business in China has grown exponentially. Since opening its
   first  store  in  Beijing  in 1999, the number of Starbucks stores has
   grown  to approximately 400 throughout 31 cities in mainland China and
   about 800 in Greater China.
   Last  week  in  China's  southwestern  Yunnan  Province, the company's
   chairman,  Howard  Schultz,  said  the  plan  is to open another 1,000
   stores  in  the  coming  years, making China Starbuck's second biggest
   market behind the United States, overtaking Canada, Japan and Britain.
   "We're  in  31  cities,  and  in cities that most Americans have never
   heard  of,"  he  said. "And the response, like Shanghai and Beijing is
   unbelievable  to  us. So we want to be aggressive and at the same time
   we  want  to demonstrate the kind of company we are in doing the right
   thing.  And  by that I mean making sure we're investing in our people,
   providing  our customers a great place to enjoy coffee and in terms of
   what  we're  gonna  do  here in Yunnan, build the kind of relationship
   with  coffee  farmers  where  we demonstrate we're gonna pay a premium
   price  for  the  highest  quality  coffee in the world, and I think do
   something that has not been done before."

   What  that  is,  is Starbucks decision to sign an agreement with local
   governments  to  open  its  first ever coffee farm in China, in Yunnan
   Province.  It's the first time Starbucks will grow its own coffee. The
   company is now hiring and training local coffee growers.

   The  agreement  calls for the Yunnan government to invest $450 million
   while  expanding  coffee  acreage  from 26,000 to 100,000 hectares. In
   addition  to  the  coffee  farm,  Starbucks will open a farmer support
   center to help local farmers with resources and expertise.
   The first beans are expected to be harvested in three years.
   Starbucks  is  facing  some  stiff  competition  in China. Reports say
   McDonald's  is  opening  new McCafes and adding coffee bars to many of
   its restaurants in China. Hong Kong based Pacific Coffee plans to open
   a thousand new outlets and British owned Costa Coffee says it will add
   250 new stores over the next three years.

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