Starbucks to Expand Footprint in China by Adding 600 Stores by 2021

(Source: Starbucks)

Starbucks is planning to open 600 new stores in China next year, thus operating 6,000 stores across 230 cities by the end of 2022.

Starbucks has been boosting its presence in China this year. In its fiscal fourth quarter ending in Sept. 2020, Starbucks opened 480 stores worldwide, 259 of which in China. The chain has more than 4,700 stores in nearly 190 cities on the mainland.

The American coffee house also invested 1.1 billion yuan ($1.68 million) in a “Coffee Innovation Park,” a complex in the city of Kunshan in the western outskirts of Shanghai.

The complex is set to be completed in 2022, sprawling over 80,000 sq. meters and including coffee roasting facilities and smart warehouses. It will become Starbucks’ second production facility outside the US and the main manufacturing, sales and distribution hub for coffee beans in the Asia-Pacific region.

Starbucks’ great strides in China reflect the increasingly vital role the country plays in its global business. Hit hard by the pandemic, same-store sales in the United States fell 9% in the fourth quarter from a year earlier, while sales in China jumped 7%.

With a deeply-rooted tea culture and ubiquitous milk tea stores, in China coffee is still not consumed as much as in the West — on average, Chinese people only drink three cups of coffee a year, according to an Alibaba report in 2018, compared to 250 cups in the UK and 363 cups in the US.

The low ranking reflects great potential. China’s total coffee consumption grew at an average annual rate of 16% in the last decade, significantly outpacing the world average of 2%, according to figures from the International Coffee Organization.

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A “coffee war” is getting increasingly heated in China with domestic brands like Luckin flourishing and international chains, such as Starbucks, Costa, Tims Coffee House, KFC and McCafe, doubling down on their efforts.

Starbucks rival McDonald’s announced in November that it will invest 2.5 billion yuan over the next three years to develop its coffee business in the country. The company plans to operate 4,000 McCafes in the Chinese market by 2023. Phyllis Cheung, CEO of McDonald’s China said McCafe’s comprehensive supply chain and existing McDonald’s storefronts are its competitive edges.

With inexpensive coffee options and flocking customers, Luckin Coffee, China’s newcomer unicorn coffee chain, is one of Starbucks’ main rival in the country, opening thousands of stores across the country in roughly two years, more than Starbucks had in its 20-year presence in China.