Starbucks opened a 30,000 square foot store in Shanghai on 5th December (3% the size of Trinity Shopping Centre).
The 30,000 square foot Starbucks Reserve Roastery in Shanghai is the coffee chain’s first Reserve Roastery outside the U.S. It’s twice the size of Starbucks’ flagship store in Seattle, where the company’s headquarters is situated.
Chinese are traditionally considered tea guzzlers and it can be safely said they are less hooked on coffee than Americans. Despite this, Starbucks continues to grow in China, already operating more than 3,000 stores and planning to add another 2,000 stores by 2021.
The company’s CEO in China, Belinda Wong suggested that Starbucks is opening a store in China every 15 hours. Because of this growth, despite disappointing sales growth elsewhere in the world, China continues to be a bright spot for the company according to last quarterly earnings.
Starbucks in China is not just about coffee. It symbolises the growth of the aspirational middle class in China. Drinking coffee or tea for that matter in Starbucks is a status statement in mainland China. What helps Starbucks is lack of competition from a domestic company with a strong brand value.
The journey of Starbucks in China’s neighbour India, a country with a similar level of growing aspirational middle class, is quite the opposite. In the beginning, the company enjoyed a fair share of the market but then faced stiff competition from the domestic brands like Barista and Cafe Coffee Day which led to a reduced market share.
Back in 1999 when Starbucks entered in China, many were skeptical that Starbucks had a chance. The strong tea tradition was not of any help to the company. However, Starbucks didn’t let the skepticism stop it. It implemented a smart market entry strategy. It did not use any advertising and promotions that could be perceived by the Chinese as a threat to their tea-drinking culture. Instead, it focused on selecting high-visibility and high-traffic locations to project its brand image.
As the Chinese middle class continued to grow, Starbucks used it as an opportunity to promote a western coffee experience, where people met with their friends while drinking coffee. The next step was to convert the tea culture of China into an asset instead of a hindrance by introducing beverages using popular local favourites like the green tea.
The main step was to make Starbucks not just about coffee but about an exceptional, glocal, experience. The English pop songs, the chic interior, popular American shows as wallpapers are all targeted to appeal the younger generation who fantasize about western coffee culture as a symbol of modern lifestyle, and a way to experience a more Western way of life. A teenager goes to Starbucks in China because it is ‘cool’ and ‘trendy’, not just for a Frappuccino. Starbucks has successfully established itself as an aspirational brand in China because of which people don’t mind paying premium prices for caffeine.
Starbucks has changed how Chinese view and drink coffee as a result of which the Asian giant has become a giant source of revenue for the company.