BEIJING -- It's not exactly intuitive that a chain of high-end coffeehouses would make inroads among ardent tea drinkers. Yet Starbucks (SBUX - Get Report) already claims over 190 stores on mainland China, just seven years after opening its first outlet in Beijing. The reason may have as much to do with China's emerging class of social climbers as with the coffee itself.
In the U.S., Starbucks does a brisk takeout business, but customers in China spend long hours hanging out in the upscale stores where they can see and be seen. Starbucks is "a symbol of status and success that's become kind of an iconic brand. People use us to highlight their lifestyle," says Jinlong Wang, the Shanghai-based president of Starbucks Greater China. "I don't think anyone can compete with us in that respect."
Company founder and chairman Howard Schultz has frequently said he expects China to become the biggest market outside North America for the Seattle-based coffee chain.
In China's biggest cities, Starbucks stores have become a common fixture in office buildings. But they've also filled a niche as a key meeting place for affluent Chinese (and foreigners) outside work hours. On nights and weekends, outlets in malls or near department stores are often full of the trendy 20- and 30-somethings who can afford to shell out 29 yuan ($3.67) for a tall green tea frappuccino.