Starbucks' next growth area: Asia
The company plans hundreds of new stores there over the next year, and it wants China to be its No. 2 market by 2014.
Starbucks plans 1,200 new stores in its next fiscal year, which starts in October. That's a 20% increase from the year before. But fewer than half will be in the U.S., its largest market, The Seattle Times reports.
About 500 of the new stores will be in Asia, and more than half of those will be in China. Asia is now contributing 13% of Starbucks' profits, up from 9% two years ago, John Culver, the president of Starbucks' Asian operations, said on the company's last earnings call. Same-store sales in the region have seen double-digit growth for 10 straight quarters.
"In China, we've been aggressive about our plans to capture more of the massive potential of that market," Culver added. "With high-store margins and low-store penetration, given the size of the country we are in the very early stages of what we think this market can ultimately reach."
Starbucks wants to make China its second-largest market by 2014 and plans 1,500 stores there by 2015. One reason for the intense focus is that an Asian Starbucks is far more profitable than a U.S. Starbucks, with an operating margin averaging 34.6%, compared with 21.8% in the Americas, Bloomberg reports.
China has the "highest financial return" of all markets, Culver told a conference in Asia last month, according to Bloomberg.
Another reason for the focus is that competitors are moving in. Italian competitor Luigi Lavazza SpA plans more than 200 new stores in China in the next three years.
How did a nation of tea drinkers come to love coffee? It took 20 years of promotions by coffee companies to get interest to where it is today, reports the Asia Times. But the Chinese also view coffee, along with wine, as Western concepts that give a sophisticated, elegant image.
"For many Chinese, especially in big cities, coffee is part of a lifestyle aspiration," Adrian Ho, the head of beverages for Nestle in China, told the Asia Times. "More and more young professionals are choosing to start the day with a cup or two at home."
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