Starbucks thriving in China’s smaller cities

Starbucks is planning to push to 1,500 stores across 70 cities in China after experiencing great success in its trial stores in the country’s smaller cities.
The coffee company has reached about 500 stores in 48 cities after 13 years in China. Often, when it arrives in a new city it is one of the first mainstream cafes in the area and is responsible for converting the locals to its version of ‘coffee culture’.

Starbucks (NAQ:SBUX) is the market leader in coffee shops in China, followed by Costa Coffee, owned by Whitbread plc of the UK, and McDonalds in third place. Coffee producer Lavazza of Italy is also expanding fast with around 200 stores planned.
John Culver, head of Starbucks in Asia Pacific, explained that tier 2 and 3 Chinese cities would be the focus of the next wave of expansion while he was visiting Hainan this week. He said China would become the company’s second largest market by 2014. Unlike many of its territories, Starbucks owns nearly all its own stores in China. The exception is Shanghai, where it originally entered the country in a joint venture with Uni-President of Taiwan.
Starbucks’ revenue in China and the rest of Asia Pacific hit USD 167 million in the first quarter of the year, which may sound a lot, but is still small compared with the USD2.6 billion generated in the USA. Its profit margin was 34.6% in the region though, ahead of 21.8% in the USA.
abd