For regulatory agencies, no nut is too hard to crack

NEWS that Starbucks would be opening its second global Reserve Roastery in Shanghai excited Wang Zheng.

NEWS that Starbucks would be opening its second global Reserve Roastery in Shanghai excited Wang Zheng, deputy director of the Jing’an District Market Supervision and Management Bureau, until he read the fine print.

It was, he said, like “walking into a blind alley.”

The Starbucks team contacted the bureau at the end of 2015 for the first time. Everyone was excited. But the devil was in the detail.

The roastery set-up involved cleaning, blending, roasting, cooling and packaging beans. There was also to be an adjacent area for serving coffee.

“Based on current food standards, the production process had to be totally enclosed,” Wang told Shanghai Daily. “Unlike traditional food manufacturing and processing procedures, which are conducted in enclosed spaces, Starbucks was proposing an open space to display the whole coffee-processing procedure to consumers. It was a challenge confronting us.”

The bureau turned to the Shanghai Food and Drug Administration for guidance in August 2016. A month later, the administration had assembled experts from the China Food and Drug Administration, food-risk assessment centers and the Shanghai Food Industry Association to evaluate the Starbucks proposal.

A special working team was established, with responsibility for communications with Starbucks.

“The team agreed that the proposal was not in line with standard food manufacturing hygiene specifications and food manufacturing licensing rules of China,” said Wang. “A green light could not be given based on those regulations.”

But where innovation and regulations clash, who’s to say the rules can’t be bent a bit?

“Our discussions centered on how to ensure food safety in an open space, and we considered coffee roasting as low risk food manufacturing,” Wang said. “We reached consensus that we could solve the licensing issue by drafting local specifications for such a specific business model.”

In March, Shanghai FDA organized a team of experts and food watchdog officials to draft a “review rule for Shanghai’s roasting coffee open manufacturing permit.” In October, after a month of soliciting public feedback, the rule was adopted.

“The whole process was quick because the regulation needed to be submitted to China’s FDA,” said Wang. “In doing so, we sought to remove legal obstacles for such an innovative business model.”

The roastery is the second of its type in the world following one launched three years ago in Seattle, which proved to be very popular with consumers because it created a new face for Starbucks and a new format for coffee appreciation.

“The roastery is an open space that integrates manufacturing and processing, which is displayed to consumers, and it has a coffee catering service,” said Zhang Zhunmin, deputy director of the Shanghai Food and Drug Administration. “It’s a brand new type of business operation for us. We had a positive attitude toward it after learning that the company wanted to open its second roastery in Shanghai.”

Government supervision and management authorities must move with the times and should support business innovation that can attract international brand names, he said. “Creating a good business environment and providing professional services for them is the responsibility of authorities,” he said.

Nonetheless, the administration was thorough in vetting the project. It covered all aspects of design and construction, equipment installation, testing and food safety, Zhang said.

“This new type of business invites consumers to experience coffee culture and allows them to see first-hand how coffee beans are processed and made into brew,” he said. “There is no strict separation of operating and catering facilities, which initially clashed with existing regulations.”

The China FDA supported the program, believing that the introduction of international brands and new business concepts would be a positive step for Shanghai’s stature as an international metropolis.

The vetting process even included a trip to Seattle to see how the first Reserve Roastery was operating and talks with the US Food and Drug Administration.

“The requirements on the Shanghai roastery are actually stricter than for its Seattle’s counterpart,” said Zhang. “We maintain high requirements on food safety.”

There were two “risks” points: the injection of the green coffee beans and the cooling of roasted beans because of the danger of dust getting into the manufacturing process, Zhang said.

The watchdog ruled that the input area must be certain distance higher above the ground, and a protective cover must be placed above the cooling plate to prevent dust dispersal. There were no such requirements for the Seattle outlet, he said.

In addition, the local administration required a “safe” separation between the manufacturing and catering areas.

The roastery opened to the public on December 6.

“Experts from the Shanghai FDA and the Jing’an market watchdog gave us a lot of guidance and help,” said Sina Han, senior quality manager of Starbucks China. “Following their suggestions, we added a protective cover above the cooling plate and installed some equipment to test moisture and ensure food safety and quality during on-site manufacturing.”

“We were very impressed by the support we received from Shanghai authorities,” said Victor Cui, VP of Public Affairs of Starbucks China. “They were very strict on rules, but they also encouraged bold innovation. It’s not easy to conduct on-site manufacturing in such a downtown location. The company was most grateful for their help.”

China is Starbucks’ second-biggest market in the world after the US, Cui said.

Shanghai was a shoe-in to host the second roastery.

“It has the largest number of Starbucks outlets in the world and is a very open and innovative city,” he said.