Starbucks upbeat about China

By Zhang Haizhou | Source: ANN

Starbucks Chief Executive Howard Schultz said China has the potential to become the company’s top market, highlighting the coffee house giant’s confidence in the Asia-Pacific market.

Announcing the company’s fiscal 2012 record revenue of $13.3 billion on Wednesday, Schultz noted the company has achieved “stunning success” in China.

“It’s no doubt that one day China will become our second-largest market after the US and it’s possible that, over many years, potentially the largest one,” he said at the company’s annual meeting of shareholders.

Starbucks now has more than 800 stores in 58 cities on the Chinese mainland, and it aims to have more than 1,500 stores in 70 cities by 2015.

Schultz made the remarks at a time when the Chinese market has never been more competitive.

The number of cafes in China doubled from 15,898 in 2007 to 31,783 in 2012, according to a report from UK-based research company Mintel Group Ltd.

Apart from Starbucks, more players are trying to get a slice of this big market.

British company Costa Coffee aims to have 500 cafes in the country by 2016, while Hong Kong-based chain Pacific Coffee said that it aims to expand and overtake Starbucks on the Chinese mainland.

Local names, such Sculpting in Time, are on track to rapid growth.

Starbucks, despite its 61 to 62 per cent market share in China’s coffee house sector, is now “encircled”, the Chinese version of Bloomberg Businessweek magazine said earlier this year.

But Schultz remains optimistic.

“In our 42 years of history, our focus has been on our customers and doing anything that we can to exceed our expectations, not on the competition,” he told China Daily before Wednesday’s meeting.

Starbucks, based in Seattle, opened its first Chinese mainland store in Beijing in 1999. It’s also the first Western cafe chain to enter the tea-drinking nation.

The Chinese mainland now ranks as the fourth-largest market in Starbucks’ global network of more than 18,000 stores in 62 countries and regions.

It had nearly 12,000 outlets in the United States, 1,175 in Canada and 975 in Japan by the end of 2012.

Schultz said Starbucks remains in “a very early stage of growth in China”, and he is “inspired about the opportunities”.

The company’s Asia-Pacific revenue increased to $721 million in the 2012 fiscal year, from $552 million the year before.

It has nearly 3,500 stores in 13 countries and regions in the Asia-Pacific.

Schultz said the “uncertainty of the world economy” and the “uncertainty of customer behavior” are the major challenges Starbucks faces.

“We are not only dealing with things that are in our control, but we have to navigate through the things that we are not,” he said.

“I’m very optimistic about the Chinese economy and the future of China.”

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