Coffee in Asia

How the world's largest coffee company is tackling the

Asian question.

David Kries 8/2/19 OGL 350

Table of Contents

1. This page
2. Brief History of Starbucks
3. Coffee Industry in the US
4. Coffee in the Asian continent
5. China
6. Adapting to the Asian Market
7. Reaching Out
8. Culture and Business
9. Sources
Brief History First store opened in 1971 in Pike Place Market in Seattle.

to Date Name was inspired by the romance of the high seas evoked
in the book Moby Dick

After a visit to Italy in 1983, the CEO was in awe by the coffee
bars in Italy and the romance of the coffee experience that
they provided in regard to being a place for conversation and
a sense of community.

After a brief hiatus, the former CEO returned to the company

in 1987, purchased it, and began expanding his newfound
vision for american coffee houses
Coffee Industry in the US at a Glance
The total economic impact of the coffee industry in the United States in 2015 was $225.2 billion. Coffee-related economic
activity comprises approximately 1.6% of the total U.S. gross domestic product. Consumers spent $74.2billion on coffee in
2015. (Source: NCAUSA)

According to Reuters, the number of Americans who drink a daily cup of coffee is at its highest since 2012.

There has been a gradual shift toward at-home coffee making as well as a preference for gourmet beverages over fast-
food style offerings.

As soda and juices show a steady decline in consumption, coffee is on a gradual trend upwards along with bottled water
and teas.

Americans are drinking a daily cup of coffee at the highest level... (2018, March 17). Retrieved from
https://www.reuters.com/article/us-coffee-conference-survey/americans-are-drinking-a-daily-cup-of-coffee-at-the-highest-
level-in-six-years-survey-idUSKCN1GT0KU
Exploding Economically, the Asian markets are experiencing rapid
growth due to population size.
Growth in the Tea used to be the dominant hot-drink of choice but coffee
Asian Market has been closing the gap over the last few years

2015 saw a consumption growth rate of 3.5% giving a

consumption total of 15.5 million 60-kilo bags

Japan and South Korea have had an established coffee

culture with China, Indonesia, Malaysia, and other
surrounding countries representing a massive untapped
customer base.

Starbucks maintains about 8600 storefronts in Asia with

their critical market being China which is home to 40% of
their stores
 A breakdown of Starbucks locations
within the Asian continent.

Source: Ambler, Pamela. “Kevin Johnson Accelerates

Starbucks Expansion Across Asia Amid Intensifying
Competition.” Forbes, Forbes Magazine, 18 Mar. 2019
An China is the company’s largest target market on the continent.

Emphasis The company expects the Chinese market to replace Canada

on China as the largest market by store count

There are currently over 1,000 outlets in more than 60

Chinese cities

Prices in the Chinese market are up to ⅓ more expensive

than those in Chicago but that seems to not have much of an
impact on sales as the average annual revenue for a store in
China is $600,000.

Source: “The Rise and Rise of Starbucks in Asia.”

Foodservice Consultants Society International, 8 Jan. 2014,
www.fcsi.org/foodservice-consultant/asia-pacific/the-asian-
expansion-of-starbucks/.
 Bringing Italian coffee culture to the United
States and Canada was a relatively easy
process as all three countries are “western”
Adapting Western and share in similar ideologies, philosophies,
and community visions.
Approaches to China and the rest of Asia present a tougher
Eastern mindsets challenge as the the lifestyles of their
respective populations engage differently with
the world around them in comparison to their
western counterparts.
Chinese Coffee Drinking coffee is still seen as a ‘foreign’, and sometimes
exotic, experience.
Culture Tea, even with the coffee industry boom in the country, is
still vastly prefered to coffee.

China has been a coffee producer for some time but the
idea of a coffeehouse is still rather recent.

The 1920s saw the first expansion of independent coffee

houses in China. This expansion continued into the late 90s
where, over that time, a huge change in Chinese consumer
and culinary culture took place.
Chinese The early 80s saw private businesses begin to
operate within the country, with an emphasis on
Coffee restaurants.
Culture This lead to a wave of foreign chains opening up
Cont. storefronts in China which brough not only new
tastes and lifestyle options, but new business
models.

Following in the footsteps of McDonalds and KFC,

Starbucks opened its first store on the Chinese
mainland in 1999.

2010 saw 400 stores in China with a goal to triple

that number in 5 years
Recognizing and Adapting to the Culture
The Chinese market (the people) are very particular about the services they receive.

There is an expectation that business models include tailoring offerings to meet the needs and wants of the Chinese.

Many chains, like KFC and McDonalds above, adjust their menus to offer local cuisines in companionship with their
traditional offerings.

In addition to a dedicated delivery service (in partnership with Chinese company Alibaba), Starbucks also offers locally
inspired seasonal drink concoctions and food items like Moon Cakes.

This quick adoption of the coffeehouse culture by the Chinese has inspired entrepreneurs to open similarly styled
businesses.

Source: Lena Henningsen (2012) Individualism for the masses? Coffee consumption and the Chinese middle class' search
for authenticity, Inter-Asia Cultural Studies, 13:3, 408-427, DOI: 10.1080/14649373.2012.689709

Biederman, Paul S. "Commentary on “Exporting a North American Concept to Asia: Starbucks in China”." Cornell Hotel and
Restaurant Administration Quarterly 46.2 (2005): 288-90. Web.
Maximizing Reach to the In 2018 Starbucks announced a partnership with the
Chinese company Alibaba
Chinese People Alibaba specializes in e-commerce and retail ventures.

Utilizing Alibaba’s vast array of retail oriented services,

Starbucks now provides delivery services, “Delivery
Kitchens” (mobile stores), and has a fully integrated “virtual
experience” for its Chinese customers; something far
beyond what they provide for their western markets.

This partnership enabled Starbucks to better reach and

integrate itself with the Chinese market.

Source: Starbucks,
stories.starbucks.com/press/2018/starbucks-and-alibaba-
announce-partnership-to-transform-coffee-experience/.
Cultural Diversity and International Business
An ethical approach to conducting business, especially internationally, is a respect for cultural rights.

“Cultural rights...include...the right to preserve traditional ways of life, right to maintain certain patterns of
behavior and belief, and the right to enjoy particular styles of social and artistic expression.” (Fryer p. 24)

Starbucks, and other companies, were able to bring their offerings in the West, to the East, and
effectively pair them with more locally traditional ingredients, better integrating itself with the Chinese
culture.

Additionally, Starbucks’ decision to partner with Alibaba shows an explicit investment into China itself.

Source: Fryer M (2015) Ethics Theory and Business Practice. Sage, Los Angeles, CA
 Ambler P (2019) Kevin Johnson Accelerates Starbucks Expansion Across Asia
Amid Intensifying Competition. In: Forbes.
https://www.forbes.com/sites/pamelaambler/2019/03/13/starbucks-accelerates-exp
ansion-across-asia-amid-intensifying-competition/#184da9ff2221
.
Sources Biederman, Paul S. "Commentary on “Exporting a North American Concept to Asia:
Starbucks in China”." Cornell Hotel and Restaurant Administration Quarterly 46.2
(2005): 288-90. Web.

Dean, J. (2003). Getting asia hooked. Far Eastern Economic Review, 166(2), 58.
Retrieved from
http://login.ezproxy1.lib.asu.edu/login?url=https://search-proquest-com.ezproxy1.lib
.asu.edu/docview/208235649?accountid=4485

Fryer M (2015) Ethics theory et business practice. Sage, Los Angeles, CA

In: Starbucks.
https://stories.starbucks.com/press/2018/starbucks-and-alibaba-announce-partners
hip-to-transform-coffee-experience/
.

Kelly L (2017) Starbucks Doubles Down On China, Targets 5,000 Stores By 2021.
In: Forbes. https://www.forbes.com/sites/ljkelly/2017/07/28/starbucks-doubles-
down-on-china-targets-5000-stores-by-2021/#440db6747a00. Accessed 5 Aug
2019

(2014) The rise and rise of Starbucks in Asia. In: Foodservice Consultants Society
International.
https://www.fcsi.org/foodservice-consultant/asia-pacific/the-asian-expansion-of-star
bucks/
.