Coffee Wars In China: Starbucks vs. Costa

Both the American and British coffee chains have big plans for expansion in China. Starbucks, which has opened 500 stores since it first arrived in China in 1999, is giving more autonomy to its Chinese managers to tailor shops to local tastes.

A Starbucks in Shanghai (Joris Leermakers)

By Wang Fang
经济观察报E.O/Worldcrunch  

BEIJING - In the capital’s Blue Harbor International Business District, there is a Starbucks on one of the outer street corners, and a Costa in the central courtyard. While local Chinese coffee shops dread the opening of a Starbucks in their neighborhood, the British chain shop goes out of its way to try to be as close to as many Starbucks as possible.

The American coffee giant first came to China in 1999. Currently there are 500 branches, with the aim of 1500 more by 2015. Costa entered China in 2006, has just 100 shops now, but is hoping to reach its goal of 2500 stores by 2018.

Expansion, expansion, expansion: that’s clearly the China policy for both coffee giants.

Starbucks has recently carried out a global restructuring. In order to strengthen its business in China, the company has focused on particular local requirements. “From selecting the location to the designing of the store, the Chinese regional office is authorized to make its own decisions,” says Wang Jingying, the new president of Starbucks China.

The American company is counting on building up its chain in first-tier cities like Beijing and Shanghai, two to three times faster than before, Wang stated. It will also expand its rate of setting up shops in in the second and third-tier cities. Last year alone, Starbucks entered 13 new Chinese cities.

Costa’s tactics are those of a boxer getting into the ring to spar with the champion. Almost all its shops are right beside a Starbucks. In terms of expansion, it’s the No. 1 in China, with two to three stores opening each week. By the end of this year, it will own 170 stores. Its ambition is to have one-third share of the coffee chain market of China, according to a recent company announcement.

In June this year, Starbucks signed an agreement with Maxim Group, its long-term partner, to take over 100% of its ownership in certain provinces, hence it now has full control of more than half of its Chinese retail stores.

Meanwhile, Costa is taking a much different approach. It has signed a cooperation agreement with the Beijing Hualian Group, a leading Chinese retailer, betting on rapidly entering high-end business complexes through the retailer’s 70 supermarkets and department stores as well as 10 shopping malls. To shorten the opening time of its new stores, Costa also gives its China office plenty of autonomy, just like its American rival.

The pace of expansion seems to be the first consideration of both chains. Whoever ends up conquering the most territory will be China's king of coffee. 

Read the original article in Chinese

photo - Joris Leermakers