China brews bubbly future for Starbucks

Shanghai Daily talked to Starbucks executive chairman Howard Schultz about local strategies and offerings as well as how to deepen penetration in a vast market like China.
Dong Jun / SHINE

Howard Schultz, executive chairman of Starbucks, visits its first overseas “Reserve Roastery” store in Shanghai last month.


Last month Starbucks launched its first overseas “Reserve Roastery,” a flagship store combining gourmet coffees and a bakery in Shanghai, and it’s eying its business in China to be on track to become “bigger, more powerful and more significant” than the firm’s US business.

The company is looking to hit 10,000 outlets in China within a decade, catching up with that in the US in terms of stores. Shanghai Daily talked to Starbucks executive chairman Howard Schultz about local strategies and offerings as well as how to deepen penetration in a vast market like China.

Q: Why do you choose to launch the Reserve Roastery in Jingan District and what’s the position of China/Shanghai in your global operation network?

A: We are grateful that the government has given Starbucks full support to bring this first-of-its-kind coffee retail experience combining coffee roasting, manufacturing, education and retail within a single facility in China.

The decision to locate our first international Roastery in Shanghai was obvious. The Shanghai Roastery represents not only our continued investment in our premium Reserve brand, serving as a halo to the rest of the company and help to solidify Starbucks as one of the leading and most admired brands in China. But more importantly, China is critical to the global economy and Shanghai is one of the most visited cosmopolitan cities in China and the world. It is also our best-served city globally with more than 600 stores.

China will continue to play a significant role in shaping Starbucks future -- as one of our two growth engines, the other being the US. Starbucks today operates 3,000 stores in China across 136 cities, making this the largest international market outside of the US. China is also Starbucks most important strategic market, opening a new store every 15 hours, and is on track to realizing our ambition to operate 5,000 stores by 2021.

Q: What factors do you think could help the Reserve Roastery in Shanghai stand out among other boutique cafes, pop-up stores or other casual dining places in Shanghai?

A: Consumers who visit this coffee wonderland will find the manufacturing facility right in front of them, the coffee will be roasted here by Chinese roasters, who have gone to Seattle for training to learn the art of roasting and brought it back here.

They will be roasting the Starbucks Reserve coffee so that customers can see what is going on inside the store.

We also have almost 100 coffee beverages created especially for this Roastery and the Princi food is introduced for the first time in Asia.

The three strategic things for Star-bucks include China, experiential retail and digital. All three elements come together in this store and in many ways we hope this is the ultimate premium experience around everything about coffee and we have also woven augmented reality experiences into the in-store experience.

China is also our second largest and fastest growing market and the intersection of these elements is what makes this store special.

Q: What proportion of sales at Starbucks China stores is currently coming from food? Do you intend to raise that proportion by maintaining the brand impression and food and beverage quality?

A: Food will represent a significant opportunity for us in the coming years in China. We are constantly exploring how we can evolve our food portfolio, to expand day-parts, and ultimately grow the overall business through a differentiated brand experience within our stores. The debut of Princi in the Shanghai Roastery is a firm demonstration of this commitment.

Princi is an artisan bakery that for over 30 years has brought the theater of baking to life using simple, yet artisanal techniques, and exceptional ingredients sourced specifically for each fresh food offering. There is no better pairing for our most premium Starbucks Reserve coffee experience than this attention to detail, meticulous care in selecting fresh-quality ingredients and the artistry of preparation. We are thrilled to bring the Princi experience to our customers in China.

Q: What’s your plan to deepen penetration into the lower tier cities in China and what about their preference for coffee drinks? Do you plan to add more localized menu items?

A: Starbucks will continue to deepen the reach of our unparalleled customer experience within our established markets in China, while exploring meaningful new ways to expand our presence across emerging cities. Starbucks is entering between 15 and 20 new cities every year and we are excited to be able to serve many more new customers their first cup of Starbucks coffee in the near future.

To ensure the authenticity and relevance of our efforts to build a truly distinctive Chinese coffee culture, we established our first R&D center in Asia in Shanghai. The China R&D center will continue to be the birthplace of even more locally-inspired, made in China, for China Starbucks coffee, tea beverages and food in the future.

Debuting for the first time within a Starbucks store in China is the Starbucks Teavana Bar at the Shanghai Roastery, which reimagines a modern tea experience for customers who increasingly seek new and different tastes and experiences, while demonstrating deep respect for thousands of years of tea tradition. Here, we craft delightfully unexpected modern tea experiences by using extraordinary ingredients in ingenious ways, such as tea-inspired cocktails, nitrogen infused teas, and the visual intrigue of the Steampunk brewing system.

Q: What’s your plan to strengthen market position beyond coffee drinks? Starbucks already has 128 Reserve stores across 34 cities in China, do you think that helps you to find distinctive coffee connoisseur in the local market?

A: For 18 years, our partners have helped us pioneer the specialty coffee sector in China. But we are deeply aware our Chinese customers are also getting more sophisticated and are constantly looking for new ways to realize their lifestyle pursuits.

The Starbucks Reserve Roastery Shanghai will bring to life the Starbucks Reserve bean-to-cup story in unimaginable ways. Upon entering the Roastery, our customers will be part of the journey of our rare, small-lot Starbucks Reserve coffees--from green coffee being roasted to perfection (for the first time in China), just feet away from where it will be handcrafted by our passionate Roastery Baristas, or packaged to be shipped to all of our stores that serve Reserve coffee in China. In addition, the Shanghai Roastery has introduced an exclusive menu specialty espresso beverages using Reserve beans, including 40 handcrafted coffee beverages created in China, for our Chinese customers.

To honor and pay tribute to our five-year close collaboration with the local coffee farmers in Yunnan, and to celebrate the grand opening of the Starbucks Reserve Roastery in Shanghai, we are proud to present the first micro-lot of Starbucks Reserve China Coffee. The Starbucks Yunnan Coffee Project is about creating a positive impact on the local coffee farming communities. In 2012, Starbucks established our first Asia-based Starbucks Farmer Support Center in Yunnan Pu’er with the aspiration to help improve the quality of Yunnan coffee and to share it with the world.


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