Friday, December 13, 2002
Starbucks plans big push into China
REUTERS
TAIPEI: Starbucks, the world's top coffee shop chain, said on Friday it is planning a big push into China, confident the tea-drinking nation will develop a taste for lattes and cappuccinos.
The company has a bold ambition to expand its stores in Asia to 6,000 from around 600, with a large number of those opening in the greater China region.
"A substantial number of those will certainly be in greater China, but whether it's half or more it's too early to say," Starbucks President Peter Maslen told Reuters in an interview.
China, known more for its penchant for tea than for double tall lattes, currently has 62 Starbucks, most of them in the wealthier cities of Beijing and Shanghai.
But Starbucks is confident it can repeat the success it has seen in Taiwan, one of its fastest growing markets in Asia. The trademark green and white mermaid features in more than 100 outlets in Taiwan, where Starbucks opened its first store in 1998.
"If you look at who the Taiwanese customers are, and who the Chinese customers are, emotionally, they are the same," Maslen said.
While China's entry to the World Trade Organization will step up competition, the company said it was ready for battle.
"We are setting our own internal expectation on a much bigger opportunity in greater China, much bigger opportunity than we originally thought," said Howard Schultz, Starbucks' chairman and chief global strategist.
"Competition is not that unhealthy because it expands the marketplace and it also creates an opportunity for us to differentiate ourselves. We welcome that."
Despite a still fragile recovery in the global economy, Starbucks said the current economic malaise would not sour thirsts for its beverage.
Starbucks Coffee Japan, a unit of the Seattle-based parent, reported last month a 55 percent drop in net profits for April-September and said it would scale back expansion plans there.
The pullback is seen as temporary by the top bean counters at Starbucks.
"In the last 20 years, in good and bad times, Starbucks has been able to continue to not only grow and expand, but to do it quite profitably," said Schultz.
Since beginning a push outside of North America in 1996, Starbuck has grown to more than 6,000 stores worldwide from 125 in 1992, when it went public. It plans to expand to 10,000 by the end of 2005 and has set a long-term goal of more than 25,000 shops.
But Schultz said expansion to gain market share would not come at the expense of shareholders' value.
"We are not interested as a company in growing in a way that will dilute the integrity of our earnings," he said.
Nor was expansion in Asia and Europe an indication of slower growth in its US market.
"We are a long, long way from approaching saturation in the United States," he said. "The markets like Taiwan, like Hong Kong, like Shanghai, like Europe are in the infant stages. It's very early days for the growth and development of the company outside of America."
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