Starbucks builds equity levels in China

Warc, 28 January 2013

BEIJING: Starbucks, the coffee house group, believes its brand equity is increasing in China, a trend it is hoping to reinforce by constantly improving the customer experience.

Its sales in China and Asia Pacific, which are reported together, rose by 11% on a like-for-like basis in the last three months, constituting a 12th successive quarter of double-digit growth.

"We feel very good about what's happening with the consumer as it relates to the Starbucks brand," John Culver, Starbucks' president for China and Asia Pacific, told analysts. "There's no doubt that you've seen some shift with other businesses and other companies in China."

A particularly promising sign for the firm is that membership levels for its My Starbucks Rewards loyalty scheme are growing rapidly, having crossed the 1m-benchmark in just over 12 months.

"We're now at 1.4m customers [who are members]," said Culver. "And that continues to accelerate."

China is Starbucks' biggest market in Asia at present, and is also expected to become its second-largest global outlet by 2014, as affluence levels rise and consumer habits evolve.

Currently, the company operates more than 700 stores across the world's most populated nation, including 100 located in Beijing alone.

One key priority is investing in attractive design and "adapt into the local architecture", in order to create a "third place" – outside of work and home – that customers will enjoy.

"The investment that we're making from a physical store perspective is creating that 'third place' environment that our customers want to come to, be a part of, and to experience overall," Culver said.

Over half of the 452 net new stores Starbucks opened worldwide in the last year were located in China, where it is seeking to boast 1,500 branches in 70 cities by 2015.

Talent management is a key priority for the organisation during such a phase of expansion, and its approach in this area aims to ensure all new branches have seasoned staff to call upon.

"We're bringing on people, we're bringing them into existing stores, and we're training them to take over and run the new stores that we're opening," said Culver.

"I think what we're seeing is that the investments we're making in our people is paying off."

Data sourced from Seeking Alpha; additional content by Warc staff