Starbucks yesterday bolstered its plans to turn historically tea-drinking China into a nation of coffee aficionados. The company said it...
Starbucks yesterday bolstered its plans to turn historically tea-drinking China into a nation of coffee aficionados. The company said it would increase to 51 percent its ownership stake in a joint venture operating 12 stores in southern China.
Starbucks Coffee International previously had 5 percent of the joint venture, with the rest owned by a subsidiary of Maxim’s Caterers Limited. Terms of the deal were not disclosed.
While the stores represents a sliver of its presence in Asia, the specialty-coffee retailer expects China to eventually become its largest specialty-coffee market outside the U.S.
Starbucks, which opened its first store in Hong Kong in May 2000, has expanded in China through joint ventures, licensees and wholly-owned ventures.
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In Beijing, Starbucks partners with Mei Da. In Shanghai and Taiwan, it operates stores with the President’s Group.
Maxim’s Catering, which jointly runs stores with Starbucks in Hong Kong and Southern China, is a catering conglomerate in Hong Kongthat operates more than 60 brands and 360 outlets.
A fashionable drink
Maxim’s yesterday had its partnership terms extended in Hong Kong and Macau. The transaction, which is expected to close in 30 days, also gives the Maxim’s subsidiary a 30 percent stake in another joint venture with Starbucks to open stores in Chengdu later this year.
“Due to the sheer geographic size of China, it is not possible for one single partner or entity to cover it completely,” said Christine Day, president of Starbucks Coffee International’s Asia Pacific Group.
Karma Hadjimichalakis, faculty director for the University of Washington business school’s Pacific Rim Bankers Program, said that while annual income per person in China is low — about $1,200 — roughly 30 million people a year are rising into higher income levels.
“When people get to the $5,000 or $10,000 per year (income level), then they’re in the middle class,” she said. “They can afford more goods.”
Day, of Starbucks, said that while its customers in China span all ages, the company targets consumers in the 18-to-mid-30s range.
“We have found that coffee is a fashionable drink in China, especially amongst the urban youth and young professionals,” she wrote in an e-mail interview, adding that Chinese customers associate Starbucks with wealth and status.
Starbucks last October raised long-term projections for the number of stores worldwide to 30,000. It plans to reach 15,000 stores in the U.S. and 15,000 abroad. The Asia-Pacific region could grow to 6,500 stores, the company predicts.
Xiao-Ping Chen, who teaches cross-cultural management at the University of Washington business school, said that while tea remains the dominant drink in China, coffee is a nod to the Western culture and that’s why it’s becoming popular.
“They like tea,” she said of Chinese consumers. “At the same time, they like to be exposed to the Western culture. It’s a different experience.”
Starbucks shares yesterday rose 19 cents to close at $55.30.
Monica Soto Ouchi: 206-515-5632 or email@example.com