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INTERVIEW: Starbucks to Open 1,500 Outlets in China by 2015

Joel on December 20, 2011 - 6:30 am in Archive, Inside Observer Intelligence, Interviews

Starbucks Marie SillowayWalking down the streets of Shanghai, you don’t have to look far before you might see a young female professional dangling a luxury handbag from her arm, while holding an Apple iPhone in one hand and sipping a venti Starbucks latte with the other. “People often view what they carry as a badge transmitting their social status to those around them,” explains Marie Han Silloway, Chief of Marketing at Starbucks China. Starbucks has been incredibly successful at building an aspirational brand in China, so much so that the Seattle-based coffee company opened its 500th store in mainland China this past October. I reached out to Marie to learn more about how Starbucks has created a coffee culture in China, and how it intends to achieve its ambitious goal of opening 1,500 stores in the Middle Kingdom by 2015.

How did Starbucks become an aspirational brand in China?

When Starbucks first entered the Chinese market twelve years ago, people were skeptical. Given that Chinese people have traditionally preferred to drink tea, it seemed impossible that Starbucks could create a coffee culture, let alone a premium one at that. What we found early on was that the only place where Chinese consumers were used to buying coffee outside their homes was either at inexpensive Asian chains or bakeries. We discovered an opportunity for Starbucks to offer a Western coffee experience, where customers could talk with close friends while drinking their favorite beverages in a comfortable environment. By offering a ‘third place’ that was neither work nor home where Chinese consumers could relax, and by offering innovative beverages, Starbucks was able to fill an unmet need in the market. Chinese consumers subsequently developed a taste for Starbucks’ products, which has led to much of our success to date.

How are you able to create an international brand with local characteristics?

We walk a fine line between maintaining our international image while tailoring our products and experience to the local market. Through our consumer research, we found that if Chinese consumers want something purely Chinese, then they will go to a local Chinese establishment. What we offer is a unique blend of ‘East meets West.’ For example, we may offer the same Toffee Nut Latte in China as we do in Seattle, but by analyzing Chinese consumer taste profiles, we can adapt our beverages for the local market – like our Matcha Green Tea Latte. Our localization practices help account for market nuances such as accommodating Chinese consumers by offering soy milk, as many people are still lactose intolerant. We also conduct extensive flavor profile research in China to determine what flavors are best suited for the market and which ones to avoid – like strong cinnamon flavors.

Like any foreign company operating in the Chinese market, we have to learn by doing. We have experienced successes and challenges, and we are continually evolving to meet the needs of our customers in first tier as well as second and third tier cities.

What approach are you taking in markets outside of China’s major metropolises?

In urban centers like Shanghai and Beijing, where we have been for the past twelve years, customers have reached a high level of sophistication given their familiarity with Starbucks and other international brands. However, as we expand further into second and third tier cities, a lot of big international brands are just starting to be introduced – there is definitely a lot of learning involved. When choosing new lower tier cities to enter, we consider markets where consumers have been exposed to travel and international brands. These markets are mature enough for our expansion. Once there, it’s important for us to engage with the local community, to educate consumers about Starbucks, and to ensure they have a flawless customer experience during each visit. One best practice we follow is to fly in our best baristas from other markets when opening new stores. These baristas act as brand ambassadors to help establish the Starbucks culture in our new stores and ensure that service at each location meets our global standards.

How is Starbucks leveraging digital media to engage existing and potential customers?

If Starbucks stores are the ‘third place’ where Chinese consumers can go to escape the pressures of work and home, then the ‘fourth place’ is digital. Starbucks customers are highly engaged online, providing us with constant feedback through our Sina Weibo account. We have an in-house digital team constantly listening and responding to customers across the Chinese web. You can tell when people have a strong connection with a brand – they will sit down and share their thoughts with you. I have not seen such a strong consumer connection with a brand in a long time. There is so much rich dialogue about people’s experience with Starbucks that is taking place online 24-7. Nothing is more powerful than word-of-mouth, especially in China. Young adults in China are sophisticated and demanding with an international mindset. Through our digital marketing activities, we have a direct channel to receive their feedback and take Starbucks to the next level in China.

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