“We’ve been in China for 20 years now,” Johnson said. “We have built this business in China, for China.”
Here are our five takeaways from the days-long confab:
1. Starbucks’s established footprint in China gives the company its edge
Starbucks already operates roughly 3,300 stores across 141 cities in China. With a new store opening every 15 hours, the company employs 45,000 people on the mainland.
Michael Runnels, associate professor of law and social responsibility at Loyola University Maryland, noted that U.S. companies often face steep barriers of entry to China. While other chains or coffee competitors clamor to gain a foothold, Starbucks is actually expanding.
“Starbucks would count itself lucky that it already has a footprint there currently, as opposed to an American company trying to establish a whole new footprint,” Runnels said.
It’s that grip that positions Starbucks to help foster China’s growing coffee culture, said Michael Schaefer, global lead for food and beverage at Euromonitor International. Schaefer said Starbucks can use its familiarity to encourage China’s still-nascent coffee culture.
2. Starbucks’s deal with Nestlé came at the right time
Earlier this month, Nestlé, which owns Nescafé and Nespresso, announced it was paying more than $7 billion for the rights to sell Starbucks coffee and tea in grocery stores around the world. At Starbucks’s China conference, executives lauded the “global coffee alliance” that would open the door for boosted sales in consumer packaged goods.
“This global license agreement with Nestlé allows us to continue to control our brand, and at the same time, Nestlé will leverage their massive scale and capabilities for global distribution,” Johnson said.
According to data compiled by Euromonitor International, Nestlé’s market share of the coffee industry in mainland China was nearly 70 percent in 2017.
And in a report this week, Morningstar wrote that the Starbucks-Nestlé partnership should be essential in boosting growth in consumer packaged goods. Nestlé has a distribution presence in almost 190 markets globally, the report said, compared with Starbucks’s 76 retail markets and 28 wholesale markets.
3. China’s middle class will be key to Starbucks’s success
“No Western company or brand is better positioned to evolve with the rapidly expanding Chinese middle class,” Johnson said in a news release from the conference.
A report published this week by Wells Fargo said Starbucks is poised to benefit from a boom among China’s middle class. The report noted “eye-watering increases” in those with discretionary income — up 35 percent between 2013 and 2017 — and the potential for a doubling of the middle-class consumer base by 2022.
Morningstar’s report said that Starbucks was among the leading consumer brands for China’s 450 million millennials — an important demographic given their disposable income, mobile phone use and influence.
4. Starbucks is a powerful, trendsetting brand in China
Runnels, who also spends summers teaching in China, said Starbucks is a popular chain and status symbol among millennials and middle-class consumers. Runnels joked that even among shoppers with flashy possessions, such as a luxury car with tinted windows, there’s a point to be made about rolling those darkened windows down to show off “holding your Starbucks coffee.”
“You can see how individuals express it in terms of expressing their new money,” Runnels said.
It’s that influence that Schaefer said Starbucks can use to develop a coffee culture in a place that has yet to fully latch on.
“If you look at the U.S. over the last 20 or 30 years, [Starbucks] didn’t introduce Americans to coffee, but they did introduce Americans to a certain take on cafe culture, a certain way of consuming coffee and experiencing coffee,” Schaefer said. “I think there’s a view that that space is wide open for them in China.”
5. In China, Starbucks is playing the long game
At the conference, Johnson said that since the company’s first store opening in China in 1999, “we’ve been playing the long game.”
The Wells Fargo report said Starbucks’s ability to make Chinese consumers love coffee more poses the company’s “biggest opportunity and challenge.”
For Runnels, that “long game” puts Starbucks on track to ride the wave of China’s massive growth. Calling China’s capacity to expand its coffee culture a “gold rush,” Runnels acknowledged that at some point, in any industry, anywhere, market saturation will happen eventually.
But if Starbucks was looking for the right place where that was still years away?
“That’s China,” he said.