Starbucks toasting to China

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Starbucks serves a Green Tea Red Bean Frappuccino in its China shops.
 

CHICAGO — With more than 1,100 stores in China today, Starbucks Corp. sees even more growth ahead in the market. The Seattle-based coffee chain expects to have 1,500 stores there by the end of next year, said Scott Maw, chief financial officer.

“It’s a market where we continue to see traction around the Starbucks experience, and there are a number of things that are helping demographically and environmentally for Starbucks in China,” Mr. Maw said during a June 11 presentation at the William Blair Growth Stock Conference.

A growing middle class and a growing adoption of coffee culture in China have propelled Starbucks in the market, and targeted beverage innovation also has contributed to strong growth.

“We have locally relevant products, so that includes things like chestnut macchiato… Green Tea Red Bean Frappuccino…” Mr. Maw said. “Local, relevant foods, things like our mood cakes for the Mid-Autumn Festival, all of those things targeted at the China market and locally relevant. The other thing that’s important in China as in many of our markets, we also have specific and locally relevant inspired design within the stores.”

Starbucks said it plans to add a total of 1,500 new stores this year, with half in China and Asia-Pacific, 600 in the Americas segment, and 150 in Europe, Middle East and Africa. In addition to locally relevant design, another area of focus in new unit development is alternative formats, which have included walkup stores on New York commuter routes and a ski-up store in Switzerland. 

“We’re building a number of stores that are effectively container stores,” Mr. Maw said. “So there are a couple of railroad containers or boxes placed on top of each other and they’re drive-up only. There’s no place to sit. You can walk up to it. We’re capturing traffic and in some of these stores, we have a couple dozen of these stores now, in some of them they’re actually already approaching the unit volumes that we’re seeing in the average Starbucks store that’s a full cafe.”

Across all formats, Starbucks is testing ways to improve throughput and customer service. Expanding upon its mobile payment option, the company plans to pilot a platform this fall that would allow customers to order in advance by phone.

“You can confirm an order that you’ve done recently or a standard order, you can modify it, walk into the store and pick it up,” Mr. Maw said. “Now what I will say, it’s easy for me to say that, but the test market is really to iron out probably a dozen different things that we have to figure out. What’s the customer experience? What’s the wait time? What’s the impact for people that have to stay in line? How do partners execute on it? What’s the impact on the drive-thru?”

Mr. Maw said Starbucks will test the platform significantly, with plans to roll it out nationally in the back half of next year.

“…There are a lot of other things that we have to learn, and we think it will help with throughput, we think it will help with customer service, giving them different options, whether it’s the drive-thru, walkup, or order in advance, to interact with Starbucks,” Mr. Maw said. “So, we’re excited about that.”
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