Starbucks brews a business in tea-drinking China
( 2002-02-08 12:03 ) (7 )

Starbucks has brewed a formula to sell coffee in tea-drinking China, where many of the 1.3 billion population used to consider the bitter beverage a foul-tasting luxury.

The US coffee chain is rapidly recovering from an early stumble to build a business tempting the tastebuds of China's fashion-conscious urbanites.

A year ago Starbucks whipped up a public furore when it opened an outlet among the labyrinth of grey stone courtyards in Beijing's centuries-old Forbidden City, the home of the Sons of Heaven, or emperors.

In 1999, according to domestic survey, 70 percent of Chinese would rather not see Starbucks share an address with their cherished national monument overlooking Tiananmen Square.

A compromise was reached. Starbucks won't discuss details but the outlet is just a threadbare counter with a few seats tucked into a corner of a souvenir shop.

The rest of the chain has become a fast-growing nouveau fashion statement in China.

``It's the feel of the place. It's very free. I like the music and it just feels relaxed,'' college student Dominique Wang, 25, said over her French language homework at a Shanghai outlet.

Starbucks' trademark green and white mermaid features in 49 outlets along China's chic shopping boulevards, most of them in the wealthier cities of Beijing and Shanghai.

The outlets with their cosy wood-panelled decor, western music and ground coffee aromas are now trendy venues for everything from intimate dates to power business meetings -- or just places to relax with a good book.

EARLY DAYS

The coffee industry has long slavered over China, which has a quarter of the world's population but accounts for less than one percent of coffee consumption, just 1,200 tonnes of roasted ground coffee a year. There is some way to go.

``Coffee? It's too bitter, I don't like it,'' said Chen Xiuzhi.

``All it did was keep me awake at night so I've switched back to Chinese tea,'' the portly housewife, 46, said while hanging her quilts out to dry in the afternoon sun.

Retiree Xue Xiuwen, 68, is proud of the fact she had never so much as touched a drop of coffee in her life.

``My husband and I drink at least one canister of tea a day,'' she said, lounging on the pavement beside a neighbourhood park. ``We old-timers like tea, it's only the young ones who like coffee.''

Starbucks officials declined to discuss how the Chinese business fitted into the global picture, after the US firm reported its first quarter net profits, for the three months to December 30, soared 40 percent year on year to US$68.4 million.

``These are still early days of our expansion in the China market,'' Pedro Man, President of Starbucks Asia Pacific, said. ``Our approach is very focused. We plan to open one store at a time, serve one customer at a time.''

They've made some headway. Coffee imports leapt 75 percent to 9,468 tonnes in 2001. Instant coffee sales jumped 42 percent in the same period, according to research firm AC Nielsen.

``Coffee culture is now very fashionable. It's not America, which can't do without coffee, but it's gaining acceptance here,'' said Jimmy Jiang, a manager at British-invested CoffeeLox.

Starbucks may find its stores easier to open in three years, when China has pledged under World Trade Organisation commitments to lift joint venture restrictions on chain stores.

However, more liberal retail laws and the ability to own distribution channels will also whet the appetites of rival overseas coffee chains.

A slew of coffee chains from Italy's Bonomi and Bella to Japan's UCC Ueshima Coffee and Hong Kong's Kamperey have laboured to win over Chinese tastebuds.

A SLOW BREW

The owners of Starbucks' China franchises are all too aware of the yawning cultural rifts they are struggling to bridge.

``Our expansion is still far short of our plan, it's not enough. The market's development has not been what we'd expected,'' said Rebecca Zhou, a marketing executive with Beijing Mei Da Coffee Co, which owns the Starbucks franchise in the capital.

``Chinese don't understand coffee very much, so they avoid it, unlike tea, which is so much part of our tradition,'' said Summer Ji, public relations manager for another franchisee, Shanghai President Coffee, a tie-up between Luwan Tobacco, Sugar & Wine Co and a subsidiary of Taiwan's Uni-President Enterprises .

Whatever the hurdles, they don't seem to discourage President and Mei Da, both of whom harbour bold ambitions to control 50 outlets each within two to three years.

Mei Da has watched its outlets balloon to 26 from nine in early 2000 and it aims to open a further eight stores in 2002.

President is also going on the offensive.

``This year we want to spread the word,'' Ji said. ``We'll hold coffee classes at our outlets and our managers can be teachers to customers who want to learn.''