Take a stroll down Fuhua 3rd Road in Shenzhen, China. Trucks, cars, mopeds and bikes weave in and out, while pedestrians sporting face masks and umbrellas attempt to avoid collision. On your right, an empty Starbucks sells coffee to nobody. Directly across the street another Starbucks remains empty, despite both cafes being open. If you continue walking you will soon find yourself at yet another Starbucks cafe. It seems illogical — why would there ever be a need for more than one?
I pull up a seat facing the window and order a cappuccino. It’s only 8:30 AM but already 90 degrees outside; perhaps an iced coffee would have been more suiting. In America this Starbucks would have a line out the door, especially during the morning rush, but there is a critical reason why this one is empty.
China is not a coffee-drinking culture, yet.
As you may know, China has an infamous affinity to tea. A proud point for nearly all Chinese people, tea is consumed with nearly every meal. Business meetings, from the small Bluetooth speakers you purchased at an electronics market to the Boeing 777 Air China just leased, are conducted over tea.
In the rare event coffee is consumed, careful precautions are taken to mask the taste. Cream, sugar and syrup are used generously — to the point where the taste of coffee is completely gone.
Quite simply, when given the choice between coffee and tea, most Chinese people will probably prefer tea. Despite this preference, however, trends show that more than 10% fewer Chinese people drink tea in 2009 than in 1993. Perhaps this is due to a population increase of more than 200 million or Western influence through corporations and brands such as Starbucks and Seven Eleven.
Starbucks is noticing.
It is quite obvious that Starbucks is well aware of this trend, as evidenced by the two competing cafes in downtown Shenzhen. And it is not limited to Shenzhen. Starbucks opens a new store every day in China, with a goal of 5,000 locations by 2021.
As the market size for coffee shops grows in China, Starbucks has made it clear they intend to remain the country’s industry leader. And despite the low customer volume for their stores in Shenzhen the strategy is quite clever: crowd out the market before competitors try to take a slice of the pie for themselves.