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Source: Global Times Global Times

Role reversals

Published: 09 Mar 2010 07:02:01 PST

By Chen Yang

With an increasing number of foreign and domestic coffee shops emerging in China's cities, coffee chain giant Starbucks is turning to traditional Chinese tea to boost business.

Since February 25 and through April 25, Starbucks will be selling White Mu Dan, Bi Luo Chun and Oriental Beauty Oolong teas for 20 yuan ($3) a cup with one free refill in about 700 of its China outlets.

Li Jing, spokeswoman for Starbucks Greater China, said other teas will be introduced in the future and Chinese tea will become a permanent offering on Starbucks' menu.

To tea or not to tea

Li said the teas are due to Chinese customers' demands. "Chinese people have a long history of drinking tea, and Starbucks has 40 years' experience in the foreign tea field, such as India's Chai tea," she said.

"Starbucks sees the opportunity in China's tea consumer market, which is made up of many small-scale teahouses," said Xie Fuliang, a tea industry expert at Achieve Brand based in Hangzhou.

China is the world's biggest tea market, with around 200 million regular tea drink-ers.

Figures from the China Tea Marketing Association show that there are more than 60,000 teahouses around the country, mostly based in Chengdu, Hangzhou and Beijing.

However, the large market hasn't resulted in a well-established national tea chain brand.

"Chinese teahouses lack strategic planning and a standard production process," Xie said. "I know some teahouse owners in Hangzhou. They run teahouses based on their personal interest and don't want to enlarge their businesses."

In Xie's eyes, Starbucks seems to offer a ready model for ambitious teahouse own-ers to follow. "As a mass consumer drink, tea can also spread by means of franchis-es," he said.

Li said Starbucks would bring its international experiences to the tea industry. "Releasing Chinese tea products is our first step. Currently the Chinese tea products are sourced from Taiwan, and we may release tea products cultivated from the mainland in the future."

"Starbucks will not grab business from traditional teahouses, as they face differ-ent consumer groups," said Zheng Xin'an, professor at the Chinese Brand Research Center, Capital University of Economics and Business. "Older people like to go to teahouses to relax, because preparing and drinking tea is a piece of slow art in their eyes, while Starbucks attracts young people and office workers in busy downtown areas."

Starbucks' regulars who were asked seemed apathetic about the company's move to be more Chinese.

Wang Sensen, a 27-year-old Starbucks fan, said she recently tried Oriental Beauty Oolong. "The price is ok, but the taste is just so-so."

However, Wang, who works at a French company near the Jianguomen area in Beijing, said she had no problem with Starbucks enlarging its drinks menu. "But me and some of my colleagues prefer coffee most of the time."

Wu Yanshuang, a 28-year-old office lady in Shanghai, agreed with Wang. "The Chinese teas didn't taste as good as I thought they would, and they won't be my first choice," said Wu.

"Coffee is always our core product, and we'll try something new in different regions in accordance with customers' tastes," said Li, Starbucks' spokeswoman.

Selling the environment

Zheng, at the Chinese Brand Research Center, was upbeat about Starbuck's move to Chinese tea. "People go to Starbucks not just for what they drink, but for the environment. So consumers actually do not care much about what Starbucks sells, but care how it is sold."

Chen Peng, a 34-year-old magazine writer in Beijing, said he enjoys Starbucks' environment. "I am not a huge coffee fan, but I like spending the whole afternoon in Starbucks, surfing the Internet or writing something."

Chen said he likes the taste of Starbuck's Bi Luo Chun. "I like to try new things and was getting bored with the regular menu. Starbucks' new drink is my cup of tea."


McCafé competition

Analysts said Starbucks' move is to strengthen the competition with other coffee chains, especially McDonald's coffee brand- McCafé.

Starbucks' global business was badly affected by the economic downturn. However, its China market is still hot, according to its quarterly report released November. "Starbucks will see China become the company's next major market after the US in the near future," said Wang Jinlong, head of Starbucks Greater China.

"Compared with a decade ago, Starbucks now has more followers in the industry, so it needs innovation to stay ahead," said Zheng.

UK's Costa, an Italian-style coffee chain, plans to open up 600 new outlets in China over the next five years. Tsit Wing International Holdings, which occupies 80 percent of Hong Kong's coffee shop market, plans to open two stores in Guangzhou this year. Nestlé, the world's largest instant coffee maker, has also opened several high-end coffee outlets in Beijing, Shanghai and Chengdu, and it may open more elsewhere in the country.

But McDonald's McCafé concept with small, comfortable coffee shops next to the hustling, bustling burger outlets is the biggest challenger to Starbucks.

Although there are only five McCafé's in China, McDonald's plans to open 65 new restaurants with the coffee shops in Beijing, Shanghai, Guangzhou and Shenzhen this year, as well as upgrade half of its 1,100 existing outlets with the coffee shops by the end of 2010. It also plans to increase the percentage of McCafé's to 80 percent by 2013, Zeng Qishan, CEO of McDonald China, said at a January press conference.

About 90 percent of McDonald's outlets in Beijing, Shanghai, Guangzhou and Shenzhen also offer free 30-minute wifi connections beginning in April, he said.

Zeng said McDonald can offer high-quality coffee at a moderate price, and is hopeful of creating a "McCafé Culture".

Zheng at the Chinese Brand Research Center said McDonald's advantages lie in its large number of outlets and low prices, but can't provide the same atmosphere as Starbucks.

Chen, the magazine writer, said he doesn't like the McCafé coffee taste. "Although the price is low, it doesn't taste as good as Starbucks," he said.

"I like McCafé's free refill but the environment is always too noisy," said Wu.

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