Asia Minute: The Venti Starbucks Bet on China

Jul 31, 2017

Credit pearchina / Pixabay

China can be a challenging market for U.S. products. Government figures show a trade deficit of nearly $350 billion last year when it comes to goods. But one American company is extending a bet on the Chinese consumer—and taking an unusual step. HPR’s Bill Dorman has more in today’s Asia Minute.

 


Starbucks is buying out its Chinese partner in the single biggest acquisition in the company’s history.

Starbucks is spending $1.3 billion to take control of the 1,300 stores in eastern China where it now shares joint ownership.

The coffeemaker already has sole ownership of 1,500 other stores in China.

It’s all about strategy—sales are growing faster in China than in any other market—including the United States.

Back in 1999 when Starbucks opened its first China store in Beijing, some skeptics wondered whether the tea culture of China would accept coffee from America.

No worries.

After a relatively slow start, the Chinese coffee market has boomed in recent years. The research firm Euromonitor International estimates the market size for coffee served in cafes in China is about $3 billion a year – nearly twenty times its size just ten years ago.

Starbucks wants to have a total of 5,000 stores in China by the year 2021—which would put the company on a pace to open about a dozen outlets a week between now and then.

One sidelight—Starbucks also announced it will be selling its 50% stake in the 410 outlets it owns in Tawian.

The buyer: Starbucks’ former partner in China.