US Starbucks eyes business expansion in fast-growing Chinese market

SAN FRANCISCO - Major US coffee chain operator Starbucks has full confidence that China will fundamentally change the company as the country has grown into Starbucks' second-largest and fastest-growing market, Starbucks CEO Kevin Johnson said Sunday.

In the first-quarter (Q1) 2018 Earnings Conference Call of the American coffee house chain, Johnson said that China has become his company's fastest growing market in Q1, with 6 percent growth driven entirely by increased transactions and 30 percent revenue growth.

"Our business in China has emerged as a growth driver that is rapidly moving us beyond our long-standing dependence on our US business for needle-moving growth," he said.

"Rapid GDP growth is fueling a massive increase in China's middle class, expected to reach 600 million consumers by 2021, up 100 percent from three years ago and almost twice the size of the total US population," Johnson noted.

Starbucks has an ambitious strategy in the promising Chinese market as it works hard to penetrate the world's second largest economy by adding more locations, with its premium Roastery and Reserve brands.

In December, Starbucks opened a Roastery location in Shanghai, an economic and financial hub in East China, its second after the one in Seattle in Washington state on the US west Pacific.

On its very first day of operation, the Shanghai Roastery became the highest grossing Starbucks store in the world, averaging more than double the number of transactions of its highly successful Seattle Roastery.

The Starbucks CEO expects to serve more than 1 million customers every year at the Shanghai Roastery.

"Starbucks has cracked the code on China and no Western consumer brand is better positioned than Starbucks in China," Johnson said.

Starbucks has become a major player in China by opening roughly one store each day, and the coffee chain will probably have more locations across China than it does back in the United States.