Starbucks in china

Starbucks in China: from market leader to runner-up in the coffee craze

Starbucks (星巴克 in Chinese) is one of the biggest coffee shop franchises in the world. Its history began in 1971, when the first store was opened in Seattle. Since then, the chain had a non-stop development and, as of 2023, it counts more than 32,000 stores in 80 countries. Starbucks was also the first ever foreign coffee shop to enter China in 1999, when the company opened its first store in Beijing. The American chain became so popular than, as of 2022, China was the second country with the highest number of Starbucks stores. As of 2023, the company operates in approximately 6,500 coffee shops located in more than 250 cities across the country, but it expect to increase this number to 9,000 units by 2025.

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Joint ventures played a fundamental role in Starbucks’ history in China

By January 2023, Chinese consumers accounted for more than 40% of the world’s tea consumption, making the task of introducing and popularizing coffee quite challenging. However, since early 1990s, more and more consumers started drinking coffee, with Starbucks playing a pioneering role in this trend inversion.

Despite having opened its first store in 1999, the history of Starbucks in China began 4 years earlier, when the American company began to sell free coffee samples in many hotels across Beijing. This move exposed Chinese consumers to the “foreign” coffee lifestyle, sparking intrigue and a desire to surf this new cultural phenomenon. It took three more years for Starbucks to set a shop in China through a combination of three different joint venture operations. Firstly, at the end of 1998, the US coffee shop chain cooperated with the Beijing Mai Da Coffee Co. to establish its first coffee bar in Beijing, which was subsequently opened in 1999. The same year, Starbucks opened a store in Shanghai in collaboration with Uni-President Group. This strategic partnership helped Starbucks gain traction in another key city in China, further solidifying its presence in the market. Continuing its expansion strategy, the US chain made significant strides in southern China in 2000. This time, the company joined forces with Mei-Xin International Ltd. to open various coffee shops, extending its reach and influence in the region.

starbucks in china
Source: Starbucks, inauguration of the 1st Starbucks coffee shop in Beijing,1999

As of 2023 Q3, Starbucks in China reached a revenue of more than USD 1.1 billion and, throughout the year, it opened more than 850 shops in the country. The American company is currently the second most popular coffee chain in China in terms of the number of stores, having being surpassed by Luckin Coffee in June 2023.

Localization and constant innovation are key for Starbucks’s success in China

Localization was one of the main strategies used by Starbucks to make its own name in the Chinese market. This involved adapting its products to cater to the preferences of local consumers. For instance, Starbucks diversified its menu by incorporating various tea flavors and incorporating local ingredients. This strategy aimed to make the drinks more “familiar” and appealing to the Chinese palate

Beyond menu adjustments, Starbucks also focused on integrating Chinese elements into its coffee shops. Many Starbucks outlets in China feature local architectural and design elements, creating a unique and culturally immersive experience for customers. A notable example is the Starbucks café at the Yuyuan Bazaar in Shanghai, exemplifying the company’s commitment to blending with the local environment.

In 2017, Starbucks opened one of its six worldwide reserve roastery in Shanghai. The project consisted in providing the consumer with the best coffee experience that the franchise could offer, presenting a selection of exclusive coffee blends and innovative brewage systems. As of 2023, the Shanghai Starbucks’ reserve roastery is the second largest in the world of its kind, immediately behind the Chicago roastery opened in 2019.

Starbucks in Shanghai
Source: CNBC, traditional Chinese architecture at the Yuyuan Bazaar’s Starbucks in Shanghai

The Seattle-based coffee shop chain’s USD 220 million investment in Jiangsu’s Coffee Innovation Park

Starbucks’ investments in China extended beyond its stores. Furthermore, In September 2023, the American Chain invested more than USD 220 million to build a Coffee Innovation Park (CIP) in the Jiangsu province. The building consists of different structures such as a roasting center, a retail point where consumers can purchase coffee directly from the factory, and an experience center which explains in depth the process behind a coffee cup. Notably, the coffee beans used in the CIP would exclusively come from local coffee partners, contributing to the growth of the domestic coffee sector and enhancing the local economy.

Starbuck’s Coffee Innovation Park (CIP)
Source: Starbucks, aerial view of the freshly built Starbuck’s Coffee Innovation Park (CIP)

Starbucks’ marketing strategies aren’t only bricks and mortar

Starbucks is also very active on Chinese social media like Weibo, where the official account has more than 1.6 million subscribers. On their profile, they frequently launch limited-edition or exclusive products which are often linked with the season of the year. As an example, on November 22nd 2023, the company announced their new winter-themed coffee cup on Weibo, purchasable only during the winter season. Meanwhile, the day before, on November 21st , the company announced the launch of the new limited-edition Macarons box on the same platform, which can be purchased together with 2 beverages for RMB 119 (USD 17).

starbucks in china: cobranding
Source: Weibo, Starbucks winter edition products launched by Starbucks in November 2023

Apart from Weibo, Starbucks’ digital marketing strategy also relies on WeChat, the biggest multi-purpose app in China. In 2017, the franchise introduced the hashtag #用星说# (Say it with Starbucks) on WeChat mini-programs. The campaign was aimed to create a social gifting feature, in which consumers could send digital gift cards or even Starbucks products to family and friends.

Moreover, in 2020, Starbucks launched further features on the Chinese platform implementing the delivery option into WeChat Mini programs. By doing so, customers were provided with the flexibility to either have their orders delivered to their preferred location or opt for the “take-away” option, allowing them to pick up their ordered products directly from Starbucks stores.

The US coffee chain’s new delivery system shows its care for the customers’ experience

Since 2018, Starbucks has been dedicated to refining its delivery system to elevate the overall shopping experience for consumers. In August of that year, the coffee giant entered into a strategic collaboration with Alibaba, a Chinese e-commerce giant, to introduce a “virtual Starbucks store.” This innovative feature aimed to leverage Alibaba’s extensive selling channels, including, Taobao, and Tmall, to enhance and expand Starbucks’ delivery options.

Building on this foundation, Starbucks continued to evolve its fast delivery service in subsequent years. In January 2022, the collaboration with Alibaba took another step forward through a partnership with Meituan, an app-based delivery platform. This strategic move further optimized the delivery system, ensuring a seamless and efficient experience for Starbucks customers.

In March 2023, the franchise launched “Starbucks Curbside” together with Amap, a provider of digital map content and navigation system under the Alibaba group. This innovative addition allowed customers to track the exact position of their order, significantly minimizing waiting times at drive-thrus. Although the service was initially available at around 150 stores in Beijing and Shanghai, Starbucks has ambitious plans to expand “Starbucks Curbside” to an additional 1,000 stores over the next year.

Luckin Coffee is giving Starbuck a run for its money

Luckin Coffee represents the biggest threat to Starbucks’ dominance on the Chinese coffee market. Founded in Xiamen in 2017, Luckin Coffee is currently the biggest coffee shop chain in China by number of coffee shops, owning more than 10,000 stores as of 2023. Low prices are one of the main factors which allowed the company to gain the lead in the newborn Chinese coffee market as the most popular coffee shop franchise. Starbucks, on the contrary, is more seen as a high-end brand in the market due to its higher-than-average prices. As an example, while a Luckin Coffee’s coffee cup has an average cost of RMB 10 to 20 (approximately USD 1.40-2.75), the prices of Starbucks are much higher, costing up to RMB 30 (more than USD 4) per cup. As a result, the sales of the Chinese company are skyrocketing among consumers, reaching RMB 13.2 billion (USD 1.84 billion) as of 2022.

Luckin Coffee is also famous for its cross-industry collaborations. In September 2023, the company collaborated with the most famous spirit brand in China “Kweichow Moutai” to create a Baijiu-flavored latte, which immediately created buzz on social media and went sold out a few hours after its launch. Starbucks responded to the rise of Luckin by relying on the capillary extension of its stores across China. Due to the intense competition in the bigger cities, since 2022, the company is trying to reach lower-tier cities, where the vast majority of Chinese people lives.

Starbucks in China, conquering the market one coffee cup at a time

  • With a revenue of USD 1.1 billion and more than 6,500 stores across China, Starbucks is one of the biggest foreign brands in the country.
  • Its history began in 1999 after having opened the first store in Beijing through a process of joint venture operations. Since then, the brand had a non-stop development.
  • Localization is one of the keys of Starbucks’ success: from using local ingredients to build its coffee shops following the Chinese architecture. Plus, the American company invested in new infrastructure for coffee production.
  • In order to boost digital marketing, Starbucks constantly launched offers and limited editions on its social media profiles.
  • Starbucks also relies on a very developed delivery system, which consists in launching collaborations with many digital platforms such as Alibaba, Meituan and Amap.
  • Luckin Coffee is the biggest competitor of Starbucks in China. it has more than 10,000 stores located across the country and reached almost USD 2 billion in sales in 2022. Starbucks responded to the Chinese franchise by shifting the attention to creating shops in lower-tier cities, where most of Chinese people live.