By
Caitlin Coyle
November
7, 2011
Starbucks is infamous for opening up
next to independent cafes and taking their business, but its Chinese chain
might lose at its own game.
A
morning cup of coffee back home was a daily ritual, but in a country that
favors tea, sometimes finding the comfort of a cup of coffee is difficult.
Trying to find a mocha or cappuccino is even harder. Two international coffee
chains are quickly attempting to change that.
This
week the Economic Observer looked at the expansion of Starbucks, an American
coffee chain, and Costa Coffee, a British coffee chain, in China. Both
companies are trying to capitalize on the Chinese market, attempting to
overcome a tea drinking culture and a large lactose intolerant population.
Regardless, the two coffee shops’ presence is becoming increasingly large in
China’s capital.
If
you go to Beijing’s Blue Harbour International District, you will see a
Starbucks at the entrance of the intersection. Costa Coffee is further into the
square, with a less ideal location, and slightly higher rent at around 10 kuai
($1.57) per square meter. Starbucks was established first in China, often
located in the best possible locations with lower rent and high traffic.
Normally, coffee shops would try and stay as far away from Starbucks as
possible. Costa Coffee, instead, tries to open stores as close to Starbucks as
they can.
Starbucks
opened its first store in China in 1999. They have since opened 500 stores and
plan to have 1,500 stores in China by 2015. Costa Coffee, though entering China
later than Starbucks in 2006, has loftier goals in terms of expansion. The
British chain currently has 100 stores in China and plans to have 2,500 by 2018.
Both companies are looking to expand into the same markets, and often times,
the same locations.
Beijing
International Airport’s Terminal 3 (T3) is a location of strategic interest for
international restaurants and companies due to its size and number of foreign
consumers. Earlier this year, Starbucks was forced to close its store on the
fourth floor; many speculate this was due to rent. However, on October 25
Starbucks opened its seventh store within the airport, its 500th store in China at the departure gate
of T3. In June year, Costa Coffee opened its 100th store in China, also at T3.
When
it comes to the Beijing International Airport, Starbucks definitely has the
upper hand. The newly appointed President of Starbucks China, Belinda Wong, in
an interview discussed the continued cooperation with the airport and how the
departure gate, with the high amount of traffic, was an excellent location to
open their 500th store.
Costa
Coffee has its own way of competing with Starbucks and their accessibility to
locations. They have managed to open most of their stores next to or in close
proximity to Starbucks. The company is also trying to increase their rate of
expansion. Costa Coffee plans to open 2 to 3 stores a week. The head of Costa
Coffee said that the goal is to win a third of the Chinese coffee market.
Starbucks
and Costa Coffee have two very different tactics in expanding into the rest of
China, where a foreign consumer base is not necessarily available. Starbucks is
taking more control in Southern China. This year they established greater
independence from their business partner, Hong Kong’s Maxim Group. Maxim Group
helped introduce Starbucks to Hong Kong and have been a part of the company’s
expansion in Southern China. However, this year Starbucks struck a deal in
which the American company now has 100% equity in the businesses in the provinces
of Guandong, Hainan, Sichuan, Shaanxi, and Hubei, as well as the municipality
of Chongqing.
While
Starbucks has begun to independently control most of its dealings in China,
Costa Coffee has continued to strengthen ties with its business venture partner,
Beijing’s Hualian Group. Primarily in the North of China, Hualian Groups’s
numerous supermarkets and department stores provide Costa Coffee with several
locations to open stores, reducing the time it takes to find available space to
set up shop.
As
far as coffee chains in China go, Starbucks still reigns supreme. However,
Costa Coffee is quickly catching up with the international brand. Both
companies are looking to expand into the same provinces and districts,
including more business in Central China. While foreigners can look forward to
not having to struggle to find a Western-style caffeine fix, coffee shops are
still finding their consumer base in China. Only time will tell if the rapid
expansion is for better or worse.
---
By
Caitlin Coyle, an intern from American University in Washington. Based on a story in
the Monday Nov. 7 edition of the EO.
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