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Starbucks’ Chinese horizon

From the December 2016 issue.

Starbucks has made China a focal point of its growth strategy over the past five years, and it looks as though they are just getting started.

John Culver

While just about the entire coffee industry is focused on the potential posed by the emergence of a coffee-drinking culture in the Asia Pacific, the world’s leading coffee retailer, Starbucks, is already reaping the rewards of its investment in the region.

Coming off the back of yet another record year of growth in what the US company refers to as China and Asia Pacific (CAP), Starbucks is understandably bullish about its prospects in the region.

“We are humbled by the way the unique Starbucks Experience has been embraced by our customers throughout the region and we are proud that today it is our fastest growing region with more than 20 million customers visiting over 6300 Starbucks stores across 16 markets each week,” Starbucks’ Group President of Global Retail, John Culver, tells Global Coffee Report.

According to the company’s financial results for the fourth quarter of the 2016 fiscal year, net revenues for the CAP segment grew 29 per cent over the same period in 2015, to reach US$839.2 million.

The company attributed the increase primarily to incremental revenues from 981 net new store openings over the past 12 months, the impact of the 53rd week in the fourth quarter, and favourable foreign currency translation.

Operating income for the CAP region grew 48 per cent over the fourth quarter in 2015 to $192.4 million, while the company’s operating margin expanded from 19.9 per cent to 22.9 per cent.

It is no accident that China is foregrounded in Starbucks’ designation for the Asia Pacific region. With 2500 stores now operating there, an increase of 2000 locations over the past five years, China is Starbucks’ largest market outside of the US. This includes 75 Starbucks Reserve stores – outlets focused on the promotion of a deeper appreciation of specialty coffee by showcasing rare, small-lot coffees.

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