Can Starbucks Make China Love Joe?

As Chains Pop Up Daily, Biggest Marketing Challenge Will Be Cultivating a Coffee Culture

A wooden sign in the lobby of Starbucks' China headquarters lists the provinces where the company operates and the number of cafes in each locale. But the coffee chain is growing so fast that it's become impossible to maintain the tally. "We can't update that board!" said Starbucks China Chief Marketing Officer Marie Han Silloway, bursting into laughter. "Forget it!"

The Seattle-based company has been in China for 13 years, with an initial presence largely in major international hubs such as Beijing, Shanghai and Guangzhou. There's huge potential for growth as it expands into lesser-developed cities with newly robust discretionary spending. But it also faces uniquely Chinese challenges when it comes to customs and taste. Ms. Silloway's marketing strategy focuses as much on educating the world's oldest and largest tea-drinking culture as it does traditional branding and promotions.

The company has more than 600 stores in the country and aims to reach 1,500 by 2015. It's a growth strategy that involves opening roughly one store every day for three years. "We've been very blessed. Starbucks has very high brand awareness to a lot of people in China, so when we go to a new city or existing city, a lot of customers know about the brand already," said Belinda Wong, president of Starbucks China.

Starbucks' greatest asset is that its target consumer in China sees it as an aspirational global brand offering an international cafe experience.

That integration was on display on a sunny late-summer day in the dusty city of Nanchang, as Starbucks opened its first location in the traditionally agricultural province of Jiangxi and in its 49th city in China.  The grand opening kicked off with coffee education for local media. An ultra-perky barista named September told the packed room that "latte" means milk in Italian, so a latte is a coffee with milk. "American-style coffee is black coffee," she explained, "so if you order one in the morning you'll be awake and alert all day!"

Who drinks coffee?
"I think coffee is more of a woman's drink, don't you?" Mr. Fu asked. "If you were doing business with a woman then maybe you could bring her to a coffeehouse. But if you were doing business with a man ... you go to a restaurant and talk business over a meal or you go to karaoke and make deals while you sing together. The idea of men talking business in a place like Starbucks ... I think that's just ridiculous."

 "There's definitely some people in Nanchang who have a habit of drinking coffee every day, but they're really a minority," she said. "People want to sit here and relax.

Starbucks also has room to grow its food selections. Although the company has created products tailored to Asian preferences, such as its black sesame green-tea cake roll, local competitors are more creative, offering hot meals such as curry and pasta. Others sell dessert plates with six mini egg tarts or other sweets, designed for the group dynamic.

"That's perfect for Chinese because they like to put a plate in the middle to share. Westerners just want a big fat muffin each," Mr. French said.

Starbucks' image as a trendy and modern brand helps mask the bigger question: whether Chinese will ever actually like coffee, something often described as "too bitter" to enjoy. Starbucks' R&D center in Shanghai has responded to that concern by developing popular fruity drinks such as Strawberry Soy Frappuccino and the Refresha line of juice beverages.

HOW TO RUN A COFFEE SHOP

Starbucks is a place to socialize, and most Chinese visit in pairs or groups. Seating is configured to reflect that, with large community tables or living room-style setups of couches and armchairs clustered around a coffee table.

In the U.S., many Starbucks are kiosks targeting the grab-and-go segment. But in China, stores must be spacious enough to accommodate consumers who linger for hours.

In China, Starbucks does the majority of its business after 2 p.m. "People like to come out for an afternoon coffee, a cake, meet up with a friend," Ms. Silloway said. "Walk into any Starbucks at 4 p.m. ... it will be very hard to find a place to sit."

Many Chinese offices are drab and crowded, making Starbucks a popular place for business meetings. A Starbucks meeting has the added bonus of making the host seem international and sophisticated.

Consumer education is essential. Starbucks' target consumers are urbanites interested in international experiences, and they're curious enough about coffee to spend $5 on a drink when an average office worker's salary is about $1,000 a month. Baristas are trained to teach consumers about the products, and stores regularly host coffee seminars.

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