As sales just started to pick up across nations, high prospects are expected for Starbucks growth in China. Starbucks China is observed to be prospering in business thanks to some of the most inspirational women leaders. These women executives in Starbucks have improved the coffee giant’s business in China. The female leaders transforming Starbucks have restored its confidence to compete in the market once again.
Although China has served in favor of Starbucks’ development ever since it set foot in 1999, the coffee giant took a major blow during the COVID-19 period, which showed a sharp decline in sales even last year. But it's once again gained footing this year when its sales went up. The brand is also back again to discussing significant development plans now. Going by its sales performance in China’s market, the coffee giant has clocked an increase of 46 percent year over year in the three months ended July 2, while revenue increased to 51 percent year over year during that same period.
Does Brands Find It Challenging to Operate in China?
When it comes to international brands growing their chains in China, many are observed to be in a difficult stance in attempting to find the silver lining, and this was the case even before COVID-19. Popular brands like McDonald's, KFC and others have faced a few downturns, from hesitance toward foreign branding to concerns about food safety, and then there was the country’s stringent COVID-19 protocol.
Starbucks Proved Otherwise
Now, Starbucks leaders are showing optimism that their approach is effective in the nation.
Some of the reasons for their optimism stem from their premiumization strategy in the marketplace and their anticipation of long-term gains. Starbucks is now hoping that a more tier-based coffee business will develop in China.
A New Dawn Begins Under Molly Liu, Chief Operating Officer, Starbucks China
Heralding a new era in the coffee giant’s business in China is Molly Liu, Chief Operating Officer, Starbucks China. Her arrival marks a second leadership shuffle ever since Brian Niccol’s appointment as CEO and Michael Conway's retirement as the branch’s North America CEO.
She Improved the Customer Experience and Beyond
Molly began her stint at Starbucks in China in 2012 and has since held many leadership positions. The coffee giant’s former CEO, Laxman Narasimhan, described her as a “strong leader who has been instrumental in elevating the Starbucks Experience for our Chinese customers.”
Starbucks did not prevail in demand in China at the time and Molly was tasked with stabilizing its branch while maintaining its spirit high amid competition from other market players like Luckin' Coffee.
Among her most notable contributions is the time she laid the groundwork for the brand’s digital flywheel in the market as head of the Digital Ventures organization. She launched digital ordering services such as Starbucks Now, which increased 48 percent of China sales in Q3 FY 23.
She also changed the rewards program into a leading loyalty program with over 20 million active members.
Then, she led the company's rapid development into new shop locations in her role as COO since 2021.
Belinda Wong, Chairwoman & CEO, Starbucks China - Sparks Innovation and Change in Company Culture
Belinda Wong, Chairwoman & CEO, Starbucks China, is also another powerhouse of the brand. Her strategic vision and entrepreneurial spirit boosted development and innovation, and created new waves around the company's culture and values. She has even made a few rounds on the Forbes and Fortune's lists of the most powerful businesswomen, both in China and outside.
She Truly Stands for Fostering a Family Culture
She is highly regarded for her work in leading people-positive ideas and for fostering a "family" culture. These are innovative programs like partner family forums and the provision of critical illness insurance, which are not just for partners but also for their parents.
She is also known for her support for communities and her stance toward creating the Beijing Starbucks Foundation in China 2020. Under her leadership, Starbucks' Planet Positive agenda in China got enhanced after she established a Farmer Support Center in 2012 that provides free agronomy intel and resources. This helps in aiding coffee farmers in implementing more sustainable practices while increasing crop yield.
More Optimism in China’s Market
Reports suggest that Starbucks is thinking of selling a portion of its China branch in an attempt to turn things around in the biggest market for branded coffee shops worldwide. Its current CEO, Brian Niccol, threw hints at the company’s actions of looking into "strategic partnerships" in China to assist the market's long-term growth. This boost comes from the coffee brand in the region, which has more than 7,500 locations. Also, China happens to be Starbucks’ second-largest market after the US, making up almost five percent of its 40,200 locations worldwide.
In China, all Starbucks branches are run by the company, which is different from the majority of markets worldwide. Niccol also claimed that the company needed to "understand the potential path to capture growth and capitalize on our strengths" in the "dynamic" Chinese market.
Joint Venture Methods Are Believed to be Successful in China
In China, joint venture methods have worked well for other significant foreign coffee chains. For example, fast food giant McDonald's sold the majority of its 2,400 locations in China to US investment group Carlyle and Beijing-based private equity firm Citic in 2017. The company currently runs over 6,000 locations in China, including 4,000 freestanding and concession McCafé locations.
In 2019, the Toronto-based restaurant conglomerate Restaurant Brands International (RBI) and the New York-based private equity firm Cartesian Capital formed a joint venture to bring the Canadian coffee chain Tim Hortons to China. Currently operating 946 locations under the trade name Tims China, the coffee chain is Tim Horton's second-largest market worldwide.
Other foreign companies that operate in China through partnerships include premium Italian coffee roaster Lavazza, which debuted in China in April 2020 as part of a joint venture agreement with quick-service restaurant chain Yum China, and California-based Peet's Coffee, which joined the market in 2017 through a joint venture with Singapore-based investment firm Hillhouse Capital.
According to World Coffee Portal's Project Café East Asia 2024 research, the Chinese branded coffee shop industry is expected to develop at a compound annual growth rate (CAGR) of 11.7 percent to reach 86,370 outlets in the fourth quarter of 2028.