China is the place to be selling coffee!

by chee Leng (on coffee makers)
(Singapore)

Starbucks has 500 outlets in China and planed to open up to 1500 by year 2015. Currently, they have 6000 shops worldwide.

This meant that 25% of their international sales is likely to be coming from China. Of course, that also meant that the expansion is 3 times what they are currently at, that would translate to opening at least 41 outlet per month from the next three years!

Is that even possible? If you track the coffee consumption pattern, it might be very possible. Folks in Taiwan drink coffee 35 times per year, Hong Kong 4.9 times, in Japan it is 107 times, and China is only 0.11 times.

Even if they increase to 1 time per year, the growth would be significant. Other than the frequency, China Population is another engine of growth.

All these seems good and nice, but are there hurdles to the growth, competition, regulations, culture etc. We all remembered how Starbucks was forced to vacate a place in forbidden city due to cultural reasons.

But right now, it seems that competition might be the biggest hindrances to Starbucks' growth.

Coast coffee, who is also expanding in China is revving its growth engine and predict opening many more outlets. So, competition might be the biggest obstacles to Starbucks growth.

And for that matter, any coffee shops or coffee chains seeking a piece of the action need to take note of the competition.

My $0.02.

Relationship is key to how business is done in China, also known as GuanXi. And Starbucks is playing its card well, by going into coffee cultivation.

Any job creation is look at favorably by the government and by so doing, it should gain Starbucks some brownie points when they apply for various permits and ease their business expansions.

They are also putting in effort in the cultural aspect by offering mooncakes and dumpling for the various Chinese festival.

Again, this would score positive points among the Chinese. This would add in their brand equity.

My opinion is, Starbucks is doing all the right things and should be poised for growth in the next few years.

Currently, I do not foresee any barriers that would be stopping their growth (Coasta is not even interested in customizing local taste).

So, if you are going to do coffee business in China, following what Starbucks is doing should be enough to get you some success.