Why Starbucks Succeeds in China

Starbucks’ expansion in China, despite one widely publicised early misstep, has been ferocious, with surging store numbers and an experimental foray into coffee farming in Yunnan. At CNBC.com, Shaun Rein explains why the company has been so unexpectedly successful in peddling its bitter, overpriced alien beverages, in contrast with many of its Western rivals.

Instead of trying to force onto the market the same products that work in the U.S., such as whip cream-covered frozen coffee concoctions, Starbucks developed flavors, such as green tea-flavored coffee drinks, that appeal to local tastes. Rather than pushing take-out orders, which account for the majority of American sales, Starbucks adapted to local consumer wants and promoted dine-in service.

By offering comfortable environments in a market where few restaurants had air conditioning in the late 1990s, Starbucks become a defacto meeting place for executives as well as for the gathering of friends. In other words, Starbucks adapted its business model specifically for the Chinese, rather than trying to transplant everything that worked in America into China, as so many brands such as Best Buy and Home Depot have done. Such approaches often proved shortsighted and ill-fated.

Responding at China Hearsay to Rein’s article, Stan Abrams suggests another contributing factor:

I think you have to factor in caffeine …. Starbucks came into the China market with no real competition and introduced a product that was an alternative means of ingesting a chemical substance that Chinese already consumed in great quantities. Although I didn’t think about it in those terms at the time, that sounds like a nice business opportunity even before we get to issues like localization.

See more on Starbucks from the CDT archives.

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