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Consumer End: Starbuck's & China

Starbucks to Double to 6,000 Stores in China by End of FY2022

CoffeeNetwork (New York) - -Today, Starbucks Corporation (NASDAQ: SBUX) presented the company’s key drivers that will fuel China’s market growth over the next five years at its first-ever China Investor Conference. Through the company’s purpose-driven growth agenda in China, Starbucks is focused on enhancing its immersive, coffee-forward approach to elevating the third place, building deeper customer relationships in digital and extending the Starbucks Experience to the on-the-go and at-home consumers. Supported by these initiatives, the company announced plans to build 600 net new stores annually over the next five years in Mainland China – a goal that will double the market’s store count from the end of FY2017 to 6,000 across 230 cities. The company also announced plans to more than triple revenue and more than double operating income in China by the end of FY2022, relative to FY2017 levels.

Today, Starbucks operates approximately 3,300 stores in 141 cities in China and employs 45,000 partners (employees). With a new store opening every 15 hours, Starbucks China’s steadfast commitment to disciplined growth, from real estate selection to partner training and operational excellence, has resulted in a store portfolio that has some of the company’s most innovative, efficient and profitable stores. Starbucks newest class of stores in China 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.

Starbucks is committed to using its scale and success to give back to communities as the company continues to grow in China. Undertaking a series of commitments, The Starbucks Foundation and Starbucks China are contributing meaningful and enduring social impact through poverty alleviation by creating opportunities for groups facing barriers, strengthening partner-driven and locally relevant community engagement, and improving the lives of Yunnan coffee farmers and their families through a $20 million USD (RMB 132 million) five-year commitment.

Starbucks has created 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. In 2014, Starbucks built its first Starbucks ReserveTM Bar to deepen customer coffee engagement and provide immersive experiences. With more than 150 locations currently, the company plans to reach 200 ReserveTM Bar stores by the end of FY2018.

Since opening the Starbucks ReserveTM Roastery in Shanghai nearly six months ago, it has become recognized as a highly dynamic and immersive coffee-forward retail experience, delivering premiumization to the coffee category and fueling the next wave of transformation that is elevating the Starbucks Experience in China.

Next month, the company will open its newest multi-level flagship format – the Beijing Fun flagship store. Located inside the high-traffic Beijing Fun shopping area, this will be the largest store globally, aside from the Roasteries. It will deliver the immersive experience found at the Roasteries through three distinct craft bar experiences: Starbucks ReserveTM coffees, TeavanaTM teas, and mixology.

Over the next five years, the Starbucks Ready-to-Drink (RTD) business in China 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.

On June 12, the company will introduce the Starbucks® chilled cup platform with four flavors, introducing a new Starbucks category to the Chinese consumer. This beverage platform is expected to quickly become a preferred on-the-go format for coffee and tea in China. The chilled cup platform builds on the success of Starbucks DoubleshotTM RTD beverages which were introduced last month.

In addition, Starbucks will look to leverage the recently announced global coffee alliance with Nestlé to provide even more at-home options to the Chinese consumer in the future. The alliance will enable Starbucks Channel Development to grow its reach and scale in the single-serve and foodservice businesses, leveraging Nestlé's reach to expand Starbucks Consumer Packaged Goods (CPG) presence from 28 countries to nearly 190 countries around the world. The alliance will also bring Starbucks Coffee to both the Nespresso and Nescafé Dolce Gusto machine platforms around the world.

Alexis Rubinstein