Starbucks planning huge expansion in China

Global coffee giant Starbucks sees China eventually overtaking Japan as its second-largest market outside North America with "thousands" of stores, chief executive Howard Schultz said Wednesday.

In the wake of cost-cutting measures in the United States involving store closures and thousands of job cuts, Schultz said Asia - particularly China - has emerged as a "major opportunity" in the chain's search for new growth.

The Seattle-based company will "over time" become a force in the Chinese market, he said during a visit to Tokyo to promote its Via brand of instant coffee and the launch of inflight Starbucks sales on All Nippon Airways.

"You have to enter China and build with a great discipline, thoughtfulness and respect for the Chinese people, and that's what we intend to do," he told AFP.

"China ultimately will be the second-largest market in the world for Starbucks after North America," he said. "You are talking thousands of stores."

Starbucks entered the Chinese market in 1999 and released ready-to-drink bottled products there two and a half years ago, a company spokeswoman said.

It currently has 700 outlets in greater China including Hong Kong and Macau and more than 300 on the mainland, said Schultz, compared with 870 in Japan where it faces intensifying competition.

"Obviously we are in the infant stages of growth and development as a company (in China)," said Schultz.

"It's a population that is very large, there is a large middle class, very aspirational. I cannot put a number on it, but it's going to be a very significant part of growth," he said.

In Japan, the Nikkei business daily reported Wednesday that Starbucks wants to expand its joint development projects with beverage giant Suntory, which is now selling packaged coffee drinks at convenience stores.

"We have several joint research projects of new products," Schultz was quoted as telling the Japanese newspaper, hinting at a possible launch of bottled products.

He said the company was still in "the early stage" of building a store network in Japan and sees further room for growth there, according to Nikkei.

Starbucks is also eyeing the promising Indian and Vietnamese markets, where the chain does not yet have a presence, Dow Jones Newswires reported.

The next challenge for Starbucks in its effort to raise growth in Asia is more successfully marketing itself to a younger, Internet-savvy demographic, analysts said.

Leading coffee shop companies such as Starbucks "are not as advanced as some of their fast food counterparts at monetising their customer base" by following mobile and digital marketing trends, said Brian Salsberg, a partner at McKinsey & Co. in Tokyo.

Starbucks' shift in attention to overseas markets comes as it recovers from the effects of the economic crisis.

In 2009 the company announced it was slashing nearly 7,000 jobs and closing 300 stores in an effort to cope with falling demand as the health of the global economy plummeted.

hih-oh-dwa/bsk