
Starbucks to Grow Coffee in China
SEATTLE (
) -- Starbucks is not only looking to
expand in China, the coffee shop chain now plans to grow coffee beans in the country.
"Starbucks, for the first time in our 40-year history, is going to start growing coffee," CEO Howard Schultz said while on a trip to Beijing.
|
"We're going to actually plant trees and grow coffee in China, in the Yunnan Province," he said, according to a
CNN
report.
>>Restaurant Stocks: Earnings to Watch
Shultz called the move "a comprehensive strategic commitment to doing business in China, in a way that's locally relevant."
China's Yunnan Province, which borders Myanmar, is a region known for its quality coffee, and the Seattle-based coffee chain is looking to work with the provincial government "to share our coffee knowledge, to help Yunnan continue to develop into a top-quality coffee-growing region and bring the distinctive Yunnan coffee taste to our customers around the world," Schultz said.
Starbucks plans to develop processing facilities in Yunnan and help farmers increase the yield and quality of their crops, the report said.
"We've been here for 12 years now, with 400 stores in the mainland, 800 stores in greater China," Schultz said.
The CEO was surprised at Starbucks' brand recognition in China ahead of its push to expand in the country. Speaking to the company's growth prospects there, he said, "Obviously, there's a tremendous size, in terms of the aspirational middle class, the numbers of people who have access to disposable income. And also they're quite familiar with western brands."
"One of the things that surprised us the most is how aware they were of Starbucks before we got here. And how fast they embrace change is another thing that has really surprised us. People were drinking black coffee when we got here. Now they are drinking cafe latte and cappuccinos and Frappuccinos," Schultz said.
|
Starbucks said earlier this week it plans to open 500 stores this fiscal year, 400 of which will be outside the U.S. It didn't specify how many of those stores would be in China but said the country would be its biggest growth market over the next two years and that Middle Kingdom consumers can expect to choose from over 1,000 Starbucks locations in the country in the "near future," according to the company's China chief, Jinlong Wang.
"I think the opportunity that we have in China -- we've underestimated it in terms of the number of stores and the reach that Starbucks is going to have," said Schultz.
Fast-food chain
McDonald's, which has more than 1,200 stores in China, said Wednesday it initiated price increases on its products sold in China in an effort to offset higher costs as the country's inflation pushed up to a two-year high at 4.4% in October.
>> McDonald's Raises Prices in China
McDonald's raised prices on its products by as much as 1 yuan (15 cents) beginning Wednesday. The food chain's last price increase was in July.
McDonald's has plans to have more than 2,000 restaurants in China within the next four years, according to Asia President Tim Fenton.
McDonald's also plans to raise prices in its U.S. and European markets to offset higher commodity costs.
McDonald's
(MCD) - Get Report
did not underscore its revenue success in the China, but said earlier this month that comps in its Asia/Pacific, Middle East and Africa region grew 5.3% in October, after
pushing up 8.1% in the third quarter.
Yum! Brands
(YUM) - Get Report
, which operates fast-food chains under the KFC, Pizza Hut and Taco Bell brands, said comps grew 6% in China in its recent quarter. In the U.S., comps grew 8% at Pizza Hut and 3% at Taco Bell. Comps at KFC fell 8%.
>>Yum's Delicious Outlook: China Watch
"We continue to make progress at all three divisions and are especially pleased with the continued strong results from our China business," said CEO David Novak. "The combination of high-return, new-unit development, same-store-sales growth and increasing margins drove operating profit growth of 23% in China for the quarter."
Acceleration in emerging markets like Russia, France and Vietnam, as well as more established European markets seems on track, noted Stifel Nicolaus analyst Steve West. Sales improvement in China should also continue to build.
-- Written by Miriam Marcus Reimer in New York.
>To contact the writer of this article, click here:
Miriam Reimer
.
>To follow the writer on Twitter, go to
http://twitter.com/miriamsmarket
.
>To submit a news tip, send an email to:
.
READERS ALSO LIKE:
>> Restaurant Stocks: Earnings to Watch
>> 5 Restaurant Stocks to Buy Now
>> Starbucks Perks Up on Broker Action
>>See our new stock quote page.
Get more stock ideas and investing advice on our sister site,
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.









