Starbucks brews up growth plan

Starbucks Executive Chairman Howard Schultz speaks at the Annual Meeting of Shareholders in Seattle, Washington on March 22, 2017. [Photo/VCG]

The global head of Starbucks said on Tuesday that his group is moving to expand its presence in China, its fastest-growing market, by focusing on premium roastery stores as well as accelerating innovations to appeal to vast numbers of social media users.

Howard Schultz, executive chairman of Starbucks Coffee Co, expressed his optimism about the Chinese economy and consumers during a trip to Beijing.

He said Starbucks is playing a "long game" and investing heavily in China to build a big and enduring business in the country.

With more than 2,600 stores, across 127 cities, and nearly 40,000 employees across the Chinese mainland, the Seattle-based coffee chain plans to expand to 5,000 stores by 2021 in China.

"We are ready to open 500 new stores each year," said Belinda Wong, CEO of Starbucks China.

She said the expansion is being driven by the rising Chinese middle class, a strong growth of specialty coffee and an increasing coffee-drinking culture among consumers.

Schultz, who took on a new role as executive chairman on April 3, said his group has focused on design and development of the Starbucks premium brand and the company's social impact initiatives.

Shanghai will be home to Starbucks' first international reserve roastery tasting room, which is expected to open by the end of this year.

The experiential coffee cafe and retail location is twice size of the company's first roastery in Seattle. The company said it will allow customers in China to better understand the craft of roasting and it will brew a range of Starbucks coffees.

Jason Yu, general manger of consumer research agency Kantar Worldpanel China, said that there is fierce competition in the sector and escalating coffee consumption by middle-class Chinese consumers.

Yu said premium stores could meet the demand from high-end consumers and help coffee chains differentiate their offers and maximize their coverage of different customer groups.

Another analyst said Starbucks is expanding to third tier cities. Summer Chen, food service analyst at Mintel Group Ltd, said the growth of per capital consumption is the growth engine for coffee chains in the future.

Rapid expansion of Starbucks has contributed to the country's booming coffee house market.

Mintel estimated that in 2016 sales by China's coffee houses will rise 12 percent on the previous year to 63.6 billion yuan ($9.2 billion).