During its first-ever China Investor Conference in Shanghai on Tuesday, the US-headquartered coffee company said it plans to more than triple sales and more than double operating income in China by the end of 2022, compared with last year’s levels.
At the end of last year, Starbucks China had about 3000 stores. Yesterday the company promised to open 600 annually from this year through to 2022.
“The power of our brand in China, the strength and momentum in our business, and the world-class Chinese leadership team give me great confidence in our ability to capture the enormous growth opportunities ahead in this dynamic market,” said Kevin Johnson, Starbucks president and CEO. “No Western company or brand is better positioned to evolve with the rapidly expanding Chinese middle class – and we continue to mindfully evolve a coffee culture in China where the reward will be healthy, long-term, profitable growth for decades to come. We are committed to long-term investment in China.”
Starbucks China’s agenda is to focus on enhancing its coffee-forward approach to elevating the third place (a philosophy in which home and workplace are the first two places and Starbucks is the third, as a preferred leisure space), building deeper customer relationships in digital and extending the Starbucks Experience to the on-the-go and at-home consumers.
“Starbucks is committed to playing the long game in China and is proud to be an integral part of the local community for nearly 20 years,” said Belinda Wong, Starbucks China CEO.
“The strong trusted relationships between our partners and customers give me great confidence in our ability to deliver our long-term growth while continuing to make investments in China, for China.”
Disciplined growth in China
Starbucks China says its newest generation stores are delivering the highest average unit volumes, return on investment and profitability of any of the market’s prior store classes in its history – “a clear demonstration that customers in China continue to embrace the Starbucks brand”.
The company has drafted what it terms a “brand roadmap” to deepen coffee knowledge and human connection, “creating a Starbucks Discovery Journey that manifests itself into a unique store development process and respect for local heritage specific to China”.
This journey starts with locally curated, core store experiences. After opening its first Starbucks Reserve Bar in 2014, it now has more than 150 of them and will reach 200 by the end of this year.
Beijing Fun flagship
Next month, the company will open its newest multi-level concept – the Beijing Fun flagship store. Located inside the high-traffic Beijing Fun shopping area, this will be the largest store globally, aside from its Roasteries.
Starbucks China also plans to expand its in-store experience and drive customer loyalty using apps and other digital platforms, embracing personalisation, mobile ordering and payment services, and home or office delivery.
During the past four years, the number of active 90-day loyalty members has nearly tripled to almost 7 million – and 90 per cent of members are now actively using the Starbucks app.
Early last year, the company launched a social media gifting feature “Say it with Starbucks” on WeChat. That has now expanded onto the Alibaba platform.
More than 60 per cent of transactions in Starbucks China stores are completed with digital payments, with just 20 per cent in cash.
Over the next five years, the Starbucks China Ready-to-Drink (RTD) business is expected to expand to more than 400 major Chinese cities across more than 125,000 premium points of distribution in partnership with Tingyi, a leader in China’s RTD beverage category.
Next month, the company will introduce the Starbucks chilled cup platform with four flavours, launching a new Starbucks category to Chinese consumers.
“This beverage platform is expected to quickly become a preferred on-the-go format for coffee and tea in China. The chilled cup concept builds on the success of Starbucks Doubleshot RTD beverages, which were introduced last month,” the company said.
Starbucks China also plans to use the recently announced global coffee alliance with Nestle to provide more at-home options to Chinese consumers.
“The alliance will enable Starbucks channel development to grow its reach and scale in the single-serve and foodservice businesses, leveraging Nestle’s reach to expand Starbucks consumer packaged goods presence from 28 countries to nearly 190 countries around the world. The alliance will also bring Starbucks Coffee to both the Nespresso and Nescafe Dolce Gusto machine platforms around the world,” said Starbucks.