Starbucks & Twitter - tweet-a-coffee

McCafe is Boosting the Competition in China Market

Helen Dou 2013.10.11.

Starbucks Coffee, the coffee market leader in China; McDonald’s, the fast food leader in China. Seems like the two business giants are happy with their own dominant territories, but looking at the prosperous growth of coffee market in China, McDonald’s decided not to just watch but to take part in.

In China, McCafe has been spreading across 24 cities with over 500 stores now, while Starbucks has presence in 60 cities with more than 1,000 stores. By the end of 2013, McCafe has the ambition to open up 200 more stores in China.

McCafe’s giant success was not too hard to expect, even though at the primary entrance to the coffee market, people doubted: how can a fast food chain compete against Starbucks. By looking at the McCafe today, the question is answered well. 

1.     The perfect channel and guaranteed audience base. McDonald’s is the largest fast food chain in the world with more than 18,710 outlets worldwide; in China, there are more than 1,500 outlets. It is easy to sell coffee along with the meals, not to mention many people would drink coffee anyways; McCafe just provides convenience for the customers.

2.     The price advantage. Even though China is a very promising coffee market, the annual consumption is only 3-5 cups per capita, coffee drinks are still expensive for many people. A cup of coffee sometimes is more expensive than a meal in China, so many people treat coffee as an indulgence rather than a everyday-must. However, Chinese people still desire to enjoy coffee, and McCafe provides good coffee for a 20% cheaper price and tasty just as good to most people. When the market is not mature enough to have deep understanding of coffee, price makes a great difference.

McDonald’s ambition in China is big. Currently, there are around 90,000 employees in China, and the company is planning to hire 75,000 more employees in this year. The recruitment represents the growing size of the business in China. Starbucks is the solid coffee market leader, but competitors like McCafe is making Starbuck’s victory challenged.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of StartJG Hong Kong.

Where Are All the Multinational Coffee Companies Going in China Right now?

Helen Dou 2013.05.29.

Starbucks:

Starbucks Goes on Chinese Grocery Shelves and into Chinese Families

Currently, Starbucks has more than 1,000 stores in China and is planning to open 1,500 by 2015. Not limited to the increase in store front, Starbucks has been investing on other distribution channels, especially in grocery. K-Cups and other products that could be taken home are becoming Starbucks' new hits. In doing so, Starbucks aims at increasing its home/indoor presence. Besides, the coffee drinks are expected to be found outside of Starbucks stores - the frappuccinos are about to be introduced into grocery store in China soon.

Starbucks China University

Starbucks' launched a Starbucks China University in Beijing in November, 2012. The curriculum covers all aspects of Starbucks operation in China. The institution is to provide talents for China's Starbucks growing business. An known goal of Starbucks is that to make China its second largest market worldwide.

Starbucks Farmer Support Center

Starbucks has established its first Asia farmer support center in Pu Er City, Yunnan Province, China. Starbucks has the commitment to elevate Yunnan province as a high quality coffee growing region. Starbucks has been working closely with farmers in Yunnan province and putting in efforts into local environment sustainability.

Resources: ChinaDaily, Forbes

Pacific Coffee Company

Advantage: Pacific Coffee Company is a subsidiary of China Resources Enterprises, Ltd, which gives Pacific Coffee Company a great advantage on the store locations in China. CRE has set aside HKD $5 billion for supermarket acquisition in China, while Pacific Coffee Company has planned to open stores in the Chinese supermarkets. Combined just looks perfect for Pacific's coffee business and for CRE's supermarket business.

Ambition: Pacific Coffee Company has stated its goal to be number one coffee house in China. It's competitor is Starbucks.

Geographical Information: 15 coffee shops in Shanghai

Resources: bloomberg, china south post

The Coffee Bean & Tea Leaf

Shanghai: 25 stores

Innovation: introducing the single-serve beverage system CBLT. This machine makes coffee making at home handy, but it's not for sale in China yet. The Coffee Bean & Tea Leaf

Campaigns: there is not obvious campaign since Feb 2012. 

Current Strategy:

- Tier 1 cities, and then tier 2 cities

- So-called "Win in China" strategy (no further detail had been revealed)

- Find a few developers for certain areas

Resources: cnbc, coffee bean china

85 degree C

Progress: 5 new stores have been opened in 2013 in Chengdu, Nanchang, Changsha, Chongqing, and Xinsu

Product range: coffee, milk tea, cake, and bread. This is very different from all other coffee brands, majorly because the brand provenance is Taiwan, which understands well about Asian customers. The brand focus is on bakeries.

In terms of social media efforts, all brands have official Weibo accounts and promote the lifestyle and new products.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of StartJG Hong Kong.

An Uprising Fashion Coffee Shop - Maan Coffee

Helen Dou 2013.10.10.

There is a new coffee shop fashion, majorly in Beijing, called Maan Coffee. Unlike big names that are frequently heard in China, such as Starbucks, Costa, or Pacific, they are western and historically associated with coffee, but Maan Coffee is an Asian coffee brand that owned by a Korean restaurant chain – Ai Jiang Shan. Ai Jiang Shan has three upscale restaurants in Beijing.

Maan Coffee was established in January 2011. The rationale behind is to build a place that is not rushing and fast. The founder is an experienced Korean restaurant owner, living in China for a few years, he realized that people need a nice place to talk and hang out. After visiting a U.B.C Coffee in Shanghai, Xin was inspired that coffee shops can be very functional, such as playing games, and started to look into a new style coffee shop.

The key words of Maan Coffee are natural and romantic. The Chinese name is "漫咖啡", which means romantic and is also identical pronunciation as "慢" (slow), and this has effectively expressed the idea of this coffee brand. The in-store environment design is like a spacious utopia, facilitated with cement walls, antique armchairs and desk lamp, as well as bookshelves. In order to demonstrate "nature", Maan Coffee even moved trees indoor. The service has been adjusted as well, after ordering, the customers do not have to stand at the end of the counter to wait for their drinks or food, Maan Coffee baristas will give each customer a lovely Teddy bear to play with while waiting for their order to be provided to table. In Maan Coffee, people can see a table as big as a single size bed, and this is substantially different from Starbucks. During weekend, it is common to see families gathering around big tables enjoying the food, drinks, and environment.

The menu has more than just coffee. Even though Maan Coffee is a coffee shop, the complete name is “Maan Coffee Ÿ Waffle & Toast”. The various exquisite food items give customers a wide selection and attract wider range of customers to find their appetites in Maan Coffee. The owner has very insightful understanding of Chinese customers. He knows that Chinese people like fresh food, thus he made the food preparation counter visible to most of the customers to show them the food here are not only delicious, but also very fresh.

Maan Coffee has opened 36 stores country-wide, and over 24 upcoming stores are under construction. China is a new coffee consumption market, but it’s already crowded. When big brands like Starbucks, Costa Coffee, Pacific Coffee are enjoying the profits, new entrants are finding different ways to share the cake. China’s close neighbor, South Korea, has a booming development of coffee business, and this has nurtured many successful Korean coffee brands at the same time. Even though Starbucks is the number one coffee shop in China, big Korean coffee brands like Caffe Bean, Angel-in-us, Hollys Coffee are already well known in China (thanks to the popularity of Korean drama). In China, coffee industry grows drastically, at the mean time, the competition is growing more fiercely than ever. Western coffee brands are facing strong Asian competitors now.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of StartJG Hong Kong.

illycaffe, the Innovative Italian Coffee Brand

Helen Dou 2013.10.7.

Illycaffe is an innovative coffee brand that specializes on espresso. Originated from Trieste, Italy in 1933, illy blend is now sold in over 140 countries worldwide. In China, illy is far behind Starbucks on physical store wise, but illy is enjoying the reputation of “high-end” coffee. As iFeng said, “Starbucks educated Chinese consumers [about coffee], and now illy is swooping in to evangelize.”

Illy adopts differentiating strategies than its competitors. Besides opening creative physical stores, illy is also the exclusive coffee provider in many five-star hotels, such as Portman Ritz-Carlton hotel, as well as in premium brand stores like Haagen Dazs. Illy’s premium strategy just the same as in Italy.

China is not a country prefers coffee drink traditionally, however, coffee brands have smartly penetrated in China market, and different brands play different roles in different phases. Nescafe is the coffee enlightener in China market; Starbucks is the educator; illy comes in as a strong uplifting alternative option for the Chinese coffee drinkers, who are seeking for higher coffee quality and unique coffee experience. We shall say, illycaffe is offering a different and premium coffee lifestyle to today’s Chinese consumers. The key words are “premium coffee lifestyle”.

The majority of illycaffe sales come from hotels and restaurants in China, which means a great opportunity to boost illy business in retail aspect. Illycaffe has identified their audience to be young people who consider drinking coffee is fashionable, and these people are more likely to appreciate arts, which is perfectly fit to illy’s culture and development direction. China has been becoming an increasingly important player in global economy and “young people” are rising, that is one of the main reasons Illy China general manager could confidently say to the public that it was not difficult for illy to make China market to comprise 10% of its global market.

Illy’s coffee & arts lifestyle has been introduced to China as well. After illy galleria opened in New York, Milan, Trieste, Istanbul, Berlin and London, the first Galleria Illy in China has been opened in Beijing in Oct. 26, 2012. The galleria is consist of international contemporary fine arts, performance of students from China Central Academy of Fine Arts, the art of gastronomy, etc. Throughout the galleria, illy is expressing its art, style and taste philosophy and values.

When Starbucks is the market leader and eye-catching brand in the crowded market, illy is a refreshing breeze to Chinese consumers.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of StartJG Hong Kong.

Starbucks' Social Responsibilities

Helen Dou 2013.10.1.

Just like any other successful western companies, Starbucks has taken the responsibilities on the environmental and social issues. While Starbucks is famous for being able to instil the coffee idea into the Chinese consumers' minds, and they have also nurtured the western environmental and social responsibility concept into Chinese mindset. Starbucks is surely a responsible company, and the responsibilities are good to generate more revenue and wider customer base.

Starbucks College Student Forerunner of Environmental Protection

Starbucks corporates with China Soong Ching Ling Foundation to encourage Chinese college students to carry out innovative activities of environmental protection and contribute to the communities. This year is the third consecutive year of this project. The effort is to increase the environmental awareness among college students.

Starbucks Global Service Month - Green Community

As an important part of the Starbucks market, Starbucks China has launched a series of community service activities in over 58 Chinese cities. Throughout the month of April from 2011 to 2013, Starbucks has successfully gathered 47,000 participants and altogether contributed approximately 71,000 service hours. These activities have well built in a "give back to society" concept.

Starbucks China Education Project

The integrated project involves different aspects of efforts.

• Improve the learning environment of rural schools and provide a better condition for the students;
• Fund the rural teacher quality improvement to increase the education fairness for the children in poor countryside, which mostly in western China provinces, such as Yunan, Guangxi, Sichuan, Chongqing;
• Water Education Project is a sub-project of the China Education Project. The aim is to increase people's knowledge of water safety and the importance of water quality.

Commitment to Origins - Global

Starbucks has promoted heavily on their efforts on sustaining the profit of coffee bean farmers to not let them suffer from volatile market fluctuations and support their families.

With all these projects and promotions of the social and environmental efforts that Starbucks has made, it is enough to impress the Chinese consumers and engage the promising generation, i.e. college students, to be hardcore Starbucks fan. 

As we all know, in China, the price of Starbucks coffee is not regarded as cheap but expensive instead. It is more expensive than in its home-country, while Chinese annual income is way lower than Americans. While Starbucks is benefitting from the higher unit revenue, Starbucks is also striving to build a green and generous image among Chinese consumers to give them a strong reason why they should buy Starbucks products, besides the reason that Starbucks products are premium quality. This will encourage coffee drinkers to choose Starbucks by reminding them that their contribution is not purely for the company's ambition, but for the good of the whole society.

All those community service activities are involving college students, or similar age age group. Starbucks realized that the concept of “community service” is becoming bolder in young people’s mind, because of the trend of studying abroad and the heavier focus on civil education, so it provides the opportunity to engage the young people. Also, it is a “cool thing to do” in most of the young people’s minds. Those activities are very effective in terms of fostering loyal customers.

Starbucks brand is inheriting in Chinese consumers’ mindset and becoming bolder.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of StartJG Hong Kong.