Starbucks continues Chinese expansion

The way Starbucks puts it, it's the coffee company's "most theatrical and immersive manifestation" meeting "perhaps the world's most electrifying city."

Put in slightly less flowery tones, Starbucks has opened its biggest ever outlet in the world — a huge, 30,000 square feet (2,787 square meters) flagship operation in Shanghai, China.

The 'Starbucks Reserve Roastery' is the first international offering of a new, upmarket Starbucks super-café, where customers can watch their beans being roasted and brewed before being served "gourmet" coffee that is marketed at a higher end than at a typical Starbucks outlet.

"The Starbucks Roastery environment honors coffee innovation as a modern-day Willy Wonka experience, where customers are only feet away from the theatre and artistry of our coffee craft," said Howard Schultz, executive chairman of the Seattle-based coffee giant.

The roastery opens its doors to the public this week and is part of a Starbucks strategy to continue an already widespread expansion in China, where the coffee company already has a presence in around 130 cities.

Big in Asia

Starbucks has over 27,000 outlets around the world and is known for rapid expansion — it was once the butt of a joke in The Simpsons for that very reason — but there appears to be more to its development in China than just standard growth.

"With the rising middle class and the opportunity in China, the market is going to be much larger here," said Schultz at the opening on Tuesday, adding that Starbucks is hoping to have 10,000 outlets in China within a decade.

Such growth would see the Chinese market become Starbucks' biggest — "bigger, more powerful and more significant" than the company's US business, according to Schultz.

Back in July, Starbucks announced the purchase of more than 1,300 stores in 25 Chinese cities in a deal worth €1.1 billion ($1.3 billion). The largest acquisition in the company's 46-year history, it was a sharp indication of the growing importance of the Chinese market to the company.

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China currently has the second highest number of Starbucks outlets in the world (behind the US) and with extensive concerns in Japan and South Korea as well, the Asia-Pacific region is especially profitable for the company — it accounted for 15 percent of Starbucks' revenue for the last financial year.

It's in China where the growth is most striking though. Over the last five years, as many new Starbucks outlets have opened in China as in the US.

Not just any old coffee shop?

A central plank of Starbucks' Asia-Pacific strategy has been to market itself as a high-end meeting location, more than just a place to buy coffee, and that model appears to be behind much of the recent expansion in China.

The Shanghai Roastery — "a veritable shrine to coffee", in the company's own words — is part of that strategy, as is the recent opening of several 'deluxe' Starbucks stores throughout the country.

However, given that there are around 6,500 cafés in Shanghai alone (around 600 are Starbucks) and a growing "coffee culture" in other cities around a country whose preferred drink has traditionally been tea, the company faces an increasing challenge to retain its chunk of a rapidly growing market.

aos/uhe (Reuters, CNN)