By 2015, Starbucks plans to nearly quadruple its storefronts in mainland China from its current 400 to a projected 1,500.
“The Chinese market represents a huge, huge opportunity and potential,” says Starbucks’ Chinese spokeswoman Caren Li.
This seems like a major shift in a country that is famous for its historical association with tea. And although tea is still popular, more and more Chinese are branching out to its dark, bitter alternative. This shift, however, is not necessarily based on the superiority of one beverage or another. Instead, it’s the atmosphere of the shop that sways them.
“I prefer to go to a tea house,” says 28-year-old Zhang Yujie, an IT company employee. “But coffee is faster and convenient, while for tea you have to take a long time to taste it.”
Yang Qing, a 45-year-old employee at an import/export company, prefers coffee houses for business meetings.
“The service is better and it is very convenient for businessmen or women,” Yang says.
Opinions like these, as well as a feeling of coffee being “in fashion,” according to Pacific Epoch retail analyst Jessie Guo, have helped the fledgling coffee industry flourish in China. Chinese Starbucks establishments average annual revenue of about $600,000. And while this is significantly less than American Starbucks’ revenue, which averages about one million dollars per store, it is higher in proportion to Chinese per capita income—a figure which is about one-tenth of per capita income in America.
Starbucks is not the only coffee company moving into the new Chinese market, however. Domestic coffee companies out of Hong Kong and Taiwan are in business on the mainland, as well as British and Canadian franchises.
Coffee buying is not the only coffee market growing in China; coffee growing is increasing as well. Starbucks recently established its own coffee farm in the southern province of Yunnan. The company plans to help local farmers implement better growing practices in order to increase crop yield, as well as nearly quadrupuling the amount of field space to devote to coffee cultivation.
“We want to source more coffee in Yunnan and bring it to more stores worldwide,” said spokeswoman Li.
About fifty percent of Yunnan’s current coffee production goes overseas. However, Starbucks hopes to foster what Li calls a “long-term partnership” that will eventually involve establishing local plants for roasting coffee beans. Currently, Starbucks exports beans to the U.S. to be roasted before going up on the global market.
Chinese authorities are enthusiastic about initiatives like this. The government has been encouraging farmers to convert tea plantations to coffee farms based on coffee’s higher return on investment.