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By Gordon Chu | July 28, 2009
Starbucks’ Special Blend of Brewed Success
I was raised on what some people may say as “sub par” coffee. Folgers. Tasters’ Choice. Instant coffee was pretty much what my parents ingested on a daily basis. Throw in a splash of 2% lowfat milk (no sugar) and you have yourself one cup of hot java mess.
In college, I fought and battled hard against drinking coffee for the first two years – but after several all-nighters, I collapsed and enjoyed my first brewed cup of “proper” coffee at Starbucks. From then on… I was hooked. The aroma. The hissing sound of boiling hot espresso. Shouts of random names, coffee drinks, special orders (“No Foam!”, “Non-fat!”, “Extra hot!”). Yes – it’s like music to my ears.
Today, I drink coffee like it’s been a part of me all my life. Taking a shower, checking email, Starbucks coffee – yes, all of that is up there on my daily things to do. Granted, the excitement of going to Starbucks is not all there like it was at the beginning, in fact, of all the different choices you have to choose from, I still prefer my good ol’ cup of cup of regular coffee. Sumatra. Black.
You can imagine my relief and my safe haven going to China and seeing my beloved green logo (albeit in Chinese). It was like going home. Starbucks in China is not a novel idea. They’ve been around since 1999 (mainland China) and succeeding quite well going into their 10th anniversary there. Here is a timeline of notable Starbucks moment in China:
1998: Starbucks opens its first store in China in Taipei, Taiwan
1999: Starbucks opens its first store in mainland China in Beijing
2000: Shanghai store opens
2002: Green Tea Frappucino is announced by President of Starbucks Taiwan to the world
2005: Starbucks donates $5M and establishes Starbucks China Education Program
2006: Reach to 19 mainland cities
2008: Reach to 26 mainland cities
2009: Celebrates 10 year anniversary in China with over 350 total stores
2010: Introduction of China coffee with beans grown in China’s countryside
All in all, it’s a great case study about a company successfully entering the China market. Not bad for a brand and a product in a country where tea is the primary cultural beverage consumed and coffee is just an afterthought.
Recently, Starbucks announced that the global recession has not impacted China sales and anticipate continued growth in the market. So, what is Starbucks’ secret to China? How did they do go about building a brand, building a following, and continue to grow their business – all without sacrificing quality, pricing, and / or business model? Here’s a hint – it’s not because of the wonderful selection of pastries (which I do absolutely love).
Go Big Or Go Home. I wished I knew the history of that saying, but it applies very well to working in China. Starbucks did what a lot of big companies looking to enter in China does – they bought their way in.
Starbucks entered into Taiwan through a joint venture with President Enterprise Corporation. In Beijing, through a licensing agreement with Mei Da Coffee Company. Shanghai? Joint venture agreement with President Cayman Holdings. Perhaps I exaggerated a tad and I would not go as far and say that Starbucks “bought” market share for entry into China, but I will say partnering up with these other companies makes a big difference in distribution, operations, and branding.
Not everyone is going to have the capability to out into China like Starbucks. It’s expensive and you need to be ready to commit for the long-term. But, the bigger you go, the faster you can get your brand out. And in China, you don’t want to get left behind.
Customer Service. Living in Los Angeles, I cannot say that I’m terribly used to fantastic customer service. I even admit that the few places I DO get fantastic customer service is at Starbucks (no shameless plug). By the time I get to the front of the line, the register has my cup in-hand, says a “Good morning Gordon,” and is ready to take my three dollars. This is a big deal to the Starbucks model and they’ve brought that same level of customer service to China.
Go to Beijing or Shanghai, the skies are lit with neon lights of brands, stores, and restaurants. It is if the marketing mantra is the bigger, the brighter, the better. In lieu of glitzy lights and over-the-top advertising, Starbucks kept relatively low-key and focused their efforts on hiring the right people to staff the stores. Nothing does more for a brand than a friendly smile, a “good morning to you”, and making them feel welcomed for a cup of coffee.
Starbucks saw themselves in the service sector – not as a consumer product. Customer service is their calling card and it has served them well.
The Great China Escape. For Starbucks, they serve more than just a cup of coffee – they serve an escape from everything else.
Even if for 10 minutes, sitting in a Starbucks has a certain relaxing appeal. Nevermind the bustle of people lining up for their turn for java, but the culture and idea of a coffee shop is to kick up your feet, grab the Sunday paper, and relax. And for China, this resonated well.
Aside from the numerous choices of products they offer, Starbucks is equally a place to meet – a destination spot for any weary person. Its important to understand for China, three dollars is a small price to pay for space and a place away from the bustle and hustle of China’s main metropolitan streets.
Tier I or Bust. The idea of focusing business and expansion in main metropolitan areas is not new or ground-breaking. However, Starbucks has taken that idea to a whole new level with stores on nearly every corner and, for whatever reason, works.
China is no different in the high level of Starbucks store per square block. It is not uncommon to have two Starbucks across the street from one another and both succeeding quite well despite having the same products within throwing distance.
More importantly, Starbucks did this to create and build their brand. They want to offer that escape anywhere a consumer wants or feels the need. Think coffee and you think Starbucks. It’s not quite as blatant and in-your-face as the bright neon lights, but eventually, the branding works.
Again, not everyone has the same operational budget to pull this marketing scheme off, but the concept can still be replicated similarly. If brands concentrate on the Tier 1 and 2 cities with hammering home the brand message, eventually the message will spread. It has worked for Coke. It has worked for Pepsi. It can definitely work for you.
Starbucks is ubiquitous to coffee both here and in China. Creating that kind of brand imagery is difficult and certainly was the fruit of 10 years of hard labor that Starbucks has had in China. Don’t get me wrong – Starbucks has lost some battles such as consumer backlash on over-presence of Western brands (Starbucks at the Forbidden city closed), but they’ve still maintained a high visibility and that’s what any brand can really ask.
Some will argue Starbucks success is an anomaly and figment of luck. There is an element of luck and great timing, but at the same time, 10 years to build a brand and launching over 350 stores is nothing to squawk about. This was also a result of hard work and careful strategy.
So, next time you’re in Starbucks and hear that familiar hiss of boiling water, don’t think espresso but the sound of success.
Gordon Chu is the VP of Business Development at METAN Development Group. For comments/questions, email gchu@metanmedia.com.
