Starbucks Plans Rapid Expansion in China

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'Starbucks store'

Starbucks coffee store in Beijing, China.

According to a recent report, Starbucks plans rapid expansion in China with 500 new store openings by the end of the year. The coffee chain hopes that the Chinese’s growing appetite for the dark brew would offset the economic turmoil the country currently faces.

Starbucks’ top executive Howard Schultz recently said in an interview that his company is set to open 500 new coffee stores every year through 2020. In China, the world’s largest coffee chain already runs 2,000 locations.

Schultz said that he is very optimistic about the future economic outlook of the world’s most populous country despite ‘the rhetoric, noise, and issues.’ The CEO plans to visit China in the coming days.

Starbucks has seen a steady growth in China unlike some restaurant chains such as Pizza Hut and KFC who had harder times. According to Starbuck’ Q4 earnings report, sales spiked six percent in China missing experts’ expectations of a 9.6 percent rise.

Like other foreign companies, the coffee chain puts a bet on wealthier customers. Yet, the company is aware that a slowing economy would trigger a lower traffic to its stores. Plus, its optimism is fuelled by the numbers– revenue generated by China sales more than doubled in Q4 from a year prior.

The Seattle-based company has high hopes that China would become its largest customer. Historically, coffee drinking hasn’t been very popular among Chinese people, who would rather drink tea. But in recent years, coffee has become increasingly popular especially in major cities.

Analysts think that China has a huge unexplored potential – in China just 4.5 billion cups of the dark brew are consumed every year. By contrast, the U.S. consumes nearly 134 billion. Independent estimates expect coffee consumption to jump 18 percent every year by the end of the decade. In the U.S. annual growth levelled off to 0.9 percent.

But Schultz is not the only U.S. executive who is bullish about the Chinese economy. KK Chua head of Mary Kay’s Asia team recently announced that the Asian market holds great potential and it hasn’t reached saturation yet.

Yet, the two U.S. companies address the upper-middle class, which was not so badly hit by the economic slowdown. Sectors such as manufacturing suffered a hard blow from the recent slowdown and international context.

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