Starbucks Brand Direct Impulse in China

On September 19, Howard Schulz, chairman of Starbucks, an American coffee chain company, took the stage at Tsinghua University. He and his coffee shop made a classic in the business world. Today's Starbucks is almost synonymous with coffee and coffee houses.

"Starbucks' development goal in the Chinese market is the largest market other than the United States," said Howard Schultz. In the years of entering China, Starbucks has basically completed the enclosure layout in first-tier cities and hot spots. At present, Starbucks has more than 140 stores in China. Since last year, Starbucks has demonstrated its long-term goal of entering second-tier cities in China. It is reported that Chengdu Starbucks Store officially opened on September 26, and preparations for opening stores in Chongqing are also underway. In addition, Starbucks will also open a new store in Dalian in October.

In fact, the Chinese market is of great significance to Starbucks. In addition to donating $5 million to set up an education program, Howard Schulz’s visit to China has a more ambitious purpose - directing to China, even though Starbucks' direct plan is being questioned by the industry.

I. Starbucks expands the secondary market

On September 20th, the 10,000th branch of Starbucks opened in Beijing's Badaling Great Wall tourist attraction. ShristineM.Day, president of Starbucks Asia Pacific, revealed that Starbucks's "entry" for second-tier cities in China is about to begin.

For Starbucks to select its shop in the “Great Wall”, it is well-intentioned. Xu Dazhi, chairman of Starbucks Beijing-based franchise operator Beijing Meida Starbucks Co., Ltd., said that China’s rapidly developing catering consumer market is precisely the direction that “USU” will open up in China in the next stage, and currently it is already Starbucks invested US$400 million in this year and will complete the task of opening 12 new stores in Beijing this year.

It is understood that due to the special nature of the Badaling Great Wall tourist attraction, the operating hours of the Great Wall branch will be different from those of other branches. The opening hours of the new store will be changed from early 8am to late 10am from 7am to 5pm. The “Wireless Broadband Internet Service” provided by Starbucks' 58 branches in the capital is not yet available at the Great Wall Store.

According to industry insiders, the tourism and catering markets in the Great Wall area of ​​Badaling are not clear, and the recent suspension of the KFC Great Wall stores has brought some uncertainty to the future fate of Starbucks' 10,000th branch store. In response, Li Fei, manager of the Starbucks Development Department of “US-US”, believes that for the catering industry operating in the suburbs, whether or not it can save costs is the key to its profitability. Unlike KFC's pure catering operations, Starbucks only focuses on beverages, so the raw materials it needs to deliver are more cost-effective than KFC's. He also said that the current annual traffic flow of 4 million passengers in Yanqing is enough to guarantee the daily turnover of the Starbucks Great Wall Store.

In fact, Starbucks has already set its determination to vigorously expand in China. Starbucks started its business in China in 1999 and currently has 143 stores in 14 cities across the country. Next, Starbucks will enter the second-tier cities and fully explore the Chinese market.

ShristineM.Day, president of Starbucks Asia Pacific, said that Starbucks has already selected 20 cities as its breakthrough point for landing China's second-tier market. The Starbucks Chengdu store will officially open on September 26th, and preparations for the opening of stores in Chongqing are also underway. Starbucks has begun its development of the Southwest market. In addition, Starbucks will also open a new store in Dalian in October.

Starbucks' plan in China has roughly entered its second stage of expansion. It is reported that Starbucks has just completed its plan to establish a joint venture in South China and Southwest China. If Starbucks repurchased shares from the Shanghai joint venture company before, Starbucks will have absolute “discourse” in the markets of Southwest China, South China, and East China. right". At the same time, Starbucks' expansion extends from the primary market to the secondary market.

It is understood that Maxim Starbucks Coffee Catering (South China) Co., Ltd. was established in 2002 by a joint venture between Maxim (International) Co., Ltd., a subsidiary of Hong Kong Maxim Foods Co., Ltd. and Starbucks Coffee International Co., Ltd., a subsidiary of Starbucks, USA. Has Starbucks franchise in Guangdong, Hainan, China. In order to adapt to the business development in South China, Maxim Starbucks Coffee & Food (South China) Co., Ltd. has successively established Guangdong and Shenzhen Co., Ltd., among which the Dongguan Starbucks store will be managed by the Guangdong company. So far, the number of branch stores of Busmax in southern China has reached 17, including 8 in Guangzhou, 8 in Shenzhen, and 1 in Dongguan.

From Guangzhou, Shenzhen to Dongguan, on Starbucks' South China map, Starbucks culture, previously only available in the domestic primary market, began to enter the secondary market. According to Maxim's Starbucks Coffee Catering (South China) Co., Ltd., the per capita spending power in Dongguan has been rising year after year, and the demand for quality of life is also increasing. Dongguan is Starbucks's third city after entering Guangzhou and Shenzhen. The industry believes that this Starbucks move marks China's expansion plan is no longer limited to Beijing, Shanghai, Guangzhou and other major cities, and began to extend to the economic circle of the Pearl River Delta.

Starbucks said that as overseas investors accelerate their entry into the Chinese coffee market, they will once again obtain control of the Hong Kong joint venture. It is reported that in an agreement signed with Maxim Foods Co., Ltd., which is actually controlled by Hong Kong Jardine Holdings Limited, Starbucks has agreed to substantially increase its presence in the joint venture between the two companies, Maxim Starbucks Coffee Catering (South China) Co., Ltd. The number of shares increased from 5% to 51%. And Maxim Starbucks Catering (South China) Co., Ltd. currently has Starbucks operations in Macau, Guangdong and Hainan.

In mainland China, people who used to drink tea have increased their love for coffee. Coffee culture is popular in the city, and Starbucks is developing very rapidly in mainland China. It has a great influence on the Chinese coffee market. It is said that Starbucks will continue its market expansion efforts in China, and the pace of development depends on the development of the Chinese coffee culture.

Starbucks said that they hope that China will become Starbucks' second largest global market, second only to its US domestic market. Howard Schulz also highlighted Starbucks China's contribution to profit growth and said it plans to continue to increase its store in China.

Second, Starbucks is moving toward full-scale direct operations

In addition to attacking the secondary market in the Mainland, the recovery of the ownership of all the shares will be converted into direct marketing and Starbucks will implement its strategy of dominating the Chinese market.

According to reports, more than 9,000 coffee shops worldwide are based on different market conditions. There are currently four types of cooperation: sole proprietorships, joint ventures, licensing agreements, and licensing operations. The first way is that Starbucks usually holds 100% equity, such as in the UK, Thailand and other places; the second Starbucks accounted for 50% of the equity, such as cooperation in Japan and other places; the third Starbucks accounted for less equity, generally About 5%, such as in Taiwan, Hong Kong and Shanghai, and other places of cooperation; and in the Philippines, Singapore, Malaysia and Beijing, Starbucks is the fourth way, does not account for shares, purely licensed operations.

Since the beginning of Starbucks' entry into China, Beijing, Shanghai, and Guangdong have respectively awarded the rights to operate Beijing Starbucks, Starbucks Shanghai, and Hong Kong Starbucks. However, Starbucks quickly realized the importance of the Chinese market. Hong Kong's Starbucks branch opened its first month of operation to achieve profitability, setting a record for the world's fastest earnings; the profitability of single stores in Shanghai and Shenzhen is also quite alarming.

According to the statistics, in 2001, the revenue of Shanghai Starbucks exceeded 60 million yuan, and in 2002 it exceeded 100 million yuan. An auditor working in the auditing of the catering industry stated that the gross profit of the catering industry, especially coffee and beverage shops, is about 50%, and the net profit is also 20%-30%. As a result, Shanghai Starbucks has obtained 32 million within two years. More than yuan profit. This has not happened in any country in the world. In other countries, Starbucks generally needs to invest for several years before it can turn a profit. However, according to the equity structure of the time, Starbucks could only get a 5% profit, that is, about 1.6 million yuan.

Faced with the huge profits of the Chinese market, smart Starbucks quickly realized the importance of holding more shares. So Starbucks had to re-examine its investment behavior. In April of this year, Starbucks established a wholly-owned company in Qingdao and opened a new store. In October, the Starbucks branch of Dalian will also appear as a wholly-owned company. This series of actions shows that Starbucks' new trends in China will become more "independent." The cancellation of China’s ban on retail markets has also provided opportunities for changes in foreign business practices.

As early as July 2003, Starbucks sharply increased its stake in Taiwan and Shanghai joint ventures, increasing its shareholding from 5% to 50%.

In addition, the new president of Starbucks has also brought another change to the company. According to reports, the new president of Starbucks had previously served as international vice president of Yum! The first 10 years of Pizza Hut’s entry into China had adopted a franchise approach, resulting in serious losses. In 1997, Yum! bought back all of its shares in China. It changed its original franchise store to a direct-run store, turning losses into losses and achieving full profitability. With the same experience, Starbucks may also embark on this path. It is only a matter of time before the recovery of power and sole proprietorship.

According to reports, in Beijing Starbucks, it has opened 58 stores with the United States and the United States. As Starbucks continues to expand in the Chinese market, US head offices are also looking for new ways of development in China.

Following the increase in the 45% equity interest in Shanghai Starbucks in July 2003, the shares of Beijing Meida Coffee Co., Ltd. (referred to as Beijing Meida) became the next target of Starbucks. At present, all Starbucks coffee shops in Beijing are in the hands of Beijing Meida. Starbucks can only obtain authorization fees. This is yet another key step for Starbucks seeking full direct operations in China.

Beijing Meida executives said that the two sides have negotiated on the purchase of shares, but no final results have yet been reached. However, this is only a matter of time, and Starbucks’s acquisition of it is "an iron nail."

Starbucks China’s control is gradually returning to Starbucks headquarters. At present, Starbucks has three partners in Mainland China: Beijing Meida Coffee Co., Ltd. exercises its agency rights in North China, and Taiwan Uniform Group exercises its agency rights in Jiangnan, such as Shanghai, Hangzhou, and Suzhou, and Maxim Starbucks Food (South). China) currently owns the Starbucks franchise in Macau, Guangdong and Hainan.

As for the authorized business model that Starbucks has been using in the Chinese market, its vice president of the Asia-Pacific region stated that Starbucks will gradually change its business strategy. In the next five years, Starbucks' investment in China will be changed from an authorization system to a direct-operated one.

Third, query Starbucks direct expansion

Although Starbucks's direct plan is progressing toward the desired goal, the industry has no shortage of concerns. An industry veteran said that retail giants such as Carrefour and Wal-Mart did not engage in franchising because they were too large to establish a franchise team. Starbucks even turned around from franchising to direct operation, and direct management, experience, teamwork and franchising mode are in a world of difference. Starbucks' ability to adapt its direct and manpower resources in overseas markets will challenge this strategy. The implementation of the effect.

It is reported that the Hong Kong Maxim Group acquired the right to operate Starbucks Hong Kong in 1999 and opened its first branch in Hong Kong in May 2000. So far, there are 51 Starbucks stores in Hong Kong.

The Maxim Group is strong and highly recognized in Hong Kong and South China. It is not easy to buy shares from them. To this end, Starbucks extended the term of the Maxim Group's Starbucks coffee shops in Hong Kong and Macau during the equity transfer. As part of the transaction, Maxim (International) Co., Ltd. will also purchase a 30% interest in a joint venture company that operates Starbucks Coffee Shop in Chengdu. A senior analyst believes that as a compensation, Starbucks had to expand the site of the Maxim Group and expand their sphere of influence from southern China to Chengdu. The purpose of Starbucks is to operate sole proprietorship. In order to further increase its stake in the future, such dilution of shares may be a deterrent measure.

The number of Starbucks stores you can never know for sure. This increasingly large company, after operating for nearly 20 years, is still expanding its territory globally at the speed of 5 stores per day. Nearly 1800 Starbucks are expected to appear around the world each year. Six years ago Starbucks opened its first store in Beijing. Subsequently, Chinese customers’ interest and love for coffee spread rapidly in Beijing, Tianjin, and even across the country.

In fact, Starbucks is opening stores at an unprecedented rate in any market. In recent years, many people in the industry questioned Starbucks' global expansion strategy: Starbucks has over-expanded. In Seattle, there is a Starbucks for every 9,400 people (the Taiwanese market plans to open one for every 200,000 people), and some media have begun to mock that Starbucks has soared to the surface tension, and it will open to Starbucks again. In the toilet.

Some analysts believe that the aggressive expansion of Starbucks overseas in recent years has led to increased foaming. Since overseas stores are mostly operated together with local partners, Starbucks's profits have decreased, especially in the Japanese market. In 2003, Starbucks considered that it was the best-developed overseas market—Japan, which had a net loss of 454 million yen. The Japanese store’s store sales decreased for 20 consecutive months. For this reason, the company had to decide to shelve the expansion plan and begin to commit to spending cuts. At the same time, Starbucks faces the same problems in other overseas markets. The company's expansion in the European markets such as the United Kingdom, France and Italy has been plagued by difficulties. In Israel, May was forced to close 6 stores in Tel Aviv and dismissed 120 employees.

In addition, Starbucks must meet the challenge of changing tastes and interests of new generation consumers. In the catering industry, the granting of stock options to temporary workers is a major invention of Starbucks. This measure has won wide praise from employees. But now, employees' dissatisfaction with overtime and reduced wages has affected the quality of service and the quality of coffee.

In September of this year, Starbucks became involved in the “bacteria over the moon cakes” controversy due to its commissioning of second-tier moon cake makers for moon cake production. Looking at recent food quality and safety incidents, there are many companies that have damaged the brand image because of the commissioned product processing.

Industry insiders stated that Starbucks is now standing at a crossroads. It is not the first place to make money now, and the more important thing is to pay attention to localization issues. Any enterprise that enters China from abroad must consider the issue of localization. On the one hand, Starbucks in China must take into account the immaturity of policies and markets, laws and regulations are not perfect, and the integrity system of the entire society has not yet been established. For Starbucks, it must be careful to find partners and carefully adjust development strategies. , choose your own localization model. This includes management models, cooperation models, and product models. These are all Starbucks issues of concern. If he does not do well at this point, even if he does well in other aspects, the failure of the face will make the success of the point erased.