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Starbucks China 2012: Overview, Analysis & Recommendations


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Starbucks China 2012: Overview, Analysis & Recommendations

  1. 1. Background of Starbucks 5C Analysis Starbucks V.M.S. TOWS Analysis STP Strategy 5P Strategy
  2. 2. І Headquarters Seattle, Washington, USA І Key person 1,462 Howard Schultz 14,822 226 3,317 І Market share 249 1% in the world І Industry/ Genre Restaurants/ Coffee house 227 58 І U.S.A Starbucks’ unique selling point is the “rich experience" that goes beyond a cup of good coffee. Founded in 1988 • 20,361sotres in 61 countries (2012/11) • Market share: 29%(2011) • 13,123 stores in U.S.A
  3. 3. І Korea І China • • • • • • Entered in 1999 Market share: 66%(2010) 738 stores in mainland China Entered in 1999 Market share: 40%(2010) 585 stores in Korea І Japan • • • Entered in 1996 Market share: 33.4%(2010) 839 stores in Japan
  4. 4. І Analysis of Chinese coffee market • Currently coffee consumption is about $10 І Coffee consumption • Reach 120,000 tons in 2012 (130,000 tons in KOR) billion in China ($1.7 trillion globally) • China coffee market is increasing about • An estimated market of 200-250 million coffee drinkers (Starbucks survey) 15~20% every year (2% globally) • Coffee franchise growth rate per year: 25% • Imported coffee: 90% І Coffee consumption/ year differs from regions • 400 tons in Shanghai • 300 tons in Beijing • 200 tons in Guangzhou
  5. 5. І Instant coffee as dominant product • Type of product: 3-in-1 mixes (coffee, milk powder and sugar)  80% of China coffee market share
  6. 6. POLICY І Joined WTO  Help Starbucks reduce cost  Such an inflow of foreign culture affected Chinese culture І І Structural opened little by little, in 2005, abrogate law which is foreign investment restrictions to retail stores From 1992, feature of China market  Starbucks acquired their own license In 2007 and 2008, expanded more than 11% (economic development), 25% (growth rate), and 16% (consumption growth) І Increase in CPI (the consumer price index)  Increase in raw material price (eg. Coffee bean, transportation fee, and so on) І Increase in Chinese GDP SOCIETY І Urbanization plan: expand up to 52% till 2015 (urban:non-urban= 49: 51, 2010) І Produce coffee bean in Yunnan І Emergence of a middle class (increased purchasing power) І Sustainable Green Growth  advantage; Starbucks image ECONOMIC І
  7. 7. І Chinese mostly drank; tea, beer, Baijiu, tepid boiled water І І After China opened up; wine, juice, creamed marzipan beverage, health elixirs, Structural feature of China market and carbonated drinks emerged І Recently drinking coffee has become popular І Around 15,000 tons of Arabica beans are harvested in Yunnan every year І At coffee stands in Shanghai foreigners tend to get their coffee to take away ↔ Chinese like to sit down and socialize or carry out business with the coffee they order І Coffee culture is more popular than coffee itself with sales
  8. 8. І Headquarters: Shanghai, China І Key person: Wang Jing Ying (current CEO in China) І Net revenues for the China/Asia Pacific segment were $198 million in Q4 FY12, an increase of 23% over 4Q FY11 More than 600 stores 1999 Opened 1st store in Beijing 2000 Opened 1st store in Shanghai 2003 2005 2008 Acquired a 50% ownership interest in SH Opened 1st store in South-China Established the greater China Regional support center in SH Expanded to 26 cities, mainland 2010 Current 2012 Launched 2008 Starbucks tea in 738 stores in mainland mainland More than 400 stores
  9. 9. Starbucks store entry Market Southern China Other Secondary Cities Mode 1999 Beijing, Tianjin, etc. License (Changed to wholly owned in 2006) 2000 Hong Kong, Shanghai, Nanjing, Hangzhou, Suzhou, Wuxi, etc. Joint Venture (Increased shares to 50% in 2003) 2002 Guangzhou, Shenzhen, Dongguan, etc Chengdu 2005 Shanghai Region 2005 Beijing Time Qingdao 2005 Dalian 2006 Xi’an, Chongqing License (Increased shares to 51%) Wholly Owned
  10. 10. Location of Starbucks China І 66% market share in Chinese coffee shop market (Costa: 8.9%, Mac Cafe: 8%)* І 162 stores in Shanghai 125 in Beijing 44 in Guangzhou І Operating margin: 34.6% (21.8% in the US) І $358 million sales in 2010 (= 3.3% of total revenue) І History of imitators eg. Shanghai Shabake Coffee Company *Source: Euromonitor International 2010
  11. 11. І Reason for coffee consumption • Coffee is a fashion beverage that comes from western countries • Drinking coffee is a social event rather than a daily necessity • Chinese like sweet coffees (mocha or café latte rather than espresso) І Chinese people visit cafes for • Music and ambiance • Branded wares (coffee mugs) • Variety of fresh pastries • Coffee experience
  12. 12. І Chinese coffee brand preference • Nestle (74.4%), Starbucks (6.7%), U.B.C coffee (5.1%) І Chinese coffee flavor preference • Add milk (44.3%), Add sugar (41.5%), Add cream (28.8%) Add milk+ sugar+ cream (6%), Fresh coffee (18%) І Chinese factor of purchase decision • Flavor (35%), Price (19%), Brand (18%) І Why do Chinese not drink coffee? • Harmful to health (20.2%), Sleeping problem (17.4%), Strange flavor (17.4%), Expensive price (10.9%)
  13. 13. Global Coffee Brand Instant Coffee • Starbucks, Costa Coffee, Coffee Bean • NesCafé, Mac Café • Nestlé, Maxwell, UCC Coffee, Domestic Coffee Brand • U.B.C Coffee, Liang’an Coffee, DIO Coffee • MANABE Coffee, Mingdian Coffee • 85℃, Pacific Coffee, Lanshan Coffee
  14. 14. • • • • • • Headquarters in Taiwan 1,271 stores in mainland Main cities: Shanghai, Beijing, Zhejiang Headquarters in U.S.A 118 stores in mainland Main cities: Beijing, Tianjin, Shenzhen U.B.C Pacific Headquarters in HK 250 stores in mainland Main cities: Beijing, Shanghai, Guangzhou Mac Cafe 85℃ • • • • • • Headquarters in UK 150 stores in mainland Main cities: Shanghai, Guangzhou, Shenzhen Costa • • • Headquarters in Taiwan 657 stores in mainland Main cities: Shanghai, Beijing, Jiangsu
  15. 15. • Headquarters in Taiwan • Founded in 1968 in Taibei • 1,271 stores in mainland • Main cities: Shanghai, Beijing, Zhejiang
  16. 16. І Nestlé sells 2 out of 3 cups of soluble coffee on the mainland І 1st multinational to establish a coffee plant in China І Favorite instant coffee brand: Nescafé has 75 % market share on the Chinese instant coffee market І Nestlé operates 21 factories in China І 3 Nespresso shops (Shanghai, HK, Beijing)
  17. 17. І Vision Establish Starbucks as the premier provider of the finest coffee in the world while maintaining our uncompromising principles while we grow І Mission Statement To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time. Here are the principles of how we live that every day: • Our coffee • Our partners • Our stores • Our neighborhood • Our shareholders І Strategy To achieve the goal, the Company plans to continue to rapidly expand its retail operations, grow its specialty sales and other operations, and selectively pursue opportunities to leverage the Starbucks brand through the introduction of new products and the development of new distribution channels.
  18. 18. І By geographic • By population, choose level of cities in China • 1-tier and 2-tier cities on the coast І By demographic • By geographic, separate to groups • By household income, separate to groups • By groups, analyze their educations, occupations and ages І By psychographics • By demographics, analyze their orientation and life styles
  19. 19. Renying Hwang, a 30-year-old who works in foreign trade. Her annual income is ¥45,000 ($7,363). She lives in Shanghai. When she has a meeting with buyers or friends, she always chooses her place of appointment as a coffee shop. Sometimes, she likes to drink coffee while reading books and listening to music. She always visits well-known branded coffee chains. Shengjuan Ye, a 25-year-old who works in a Korean teaching Academy. Her annual income is ¥25,000 ($4,090). She lives in Hangzhou. Jiayan Wang, a 24-year-old who works in an electronic factory as a technician. Her annual income is ¥22,000 ($3,600). She also lives in Hangzhou. They lived in Korea before. During that time they often went to a coffee chain to drink coffee while they did homework and chatted. They like the flavor of coffee.
  20. 20. High Price Low High Low Brand image
  21. 21. • 我们卖的不是咖啡,我们卖的是体验  We are not selling coffee, we are delivering an experience • Between home and work: Relaxing, Comfortable and Convenient • Relaxing: diverse music, coffee variety and aroma • Comfortable: sofas, well designed interiors • Convenient: free wifi, ideal locations, quick service
  22. 22. І Narrow range of products І І Limited localized choices Product line extension and set menus • Localized teas and food: moon cakes  3 Chinese teas І Free wifi without ID/Password І No local Chinese food І Increased number of electrical outlets І Limited personal interaction with the staff І Coffee knowledge/education kiosk І Season Coffee: Toffee nut latte І Customized music offerings (Playlist)
  23. 23. І Premium pricing strategy І І Few discounts Lower prices in 2nd-tier cities based on CPI І Discount on new products to increase acceptance rate І Same premium pricing strategy in the primary cities І Lower prices when using Yunnan Arabica coffee bean
  24. 24. І Starbucks employs 1-level consumer І • marketing channel in China • Exclusive distribution at company owned Coffee beans, Via instant Arabica coffee beans sourced globally • 86% of coffee purchased in 2011 ethically sourced • Joint Venture with Ai Ni Group in Feb 2012 − Yunnan province Arabica beans to be used domestically and exported І Highlight use of Yunnan Arabica beans І retail outlets І Expand into wholesale markets Transition from renting to owning property І Heated seating and more comfortable chairs
  25. 25. І Seasonal promotions І І Personalized marketing І Product promotions Maintain image of coffee culture • Interactive marketing events (tasting, sampling) І Starbucks community programs І Seasonal promotions • Chinese New Year • Mid-autumn festival • National day І Drawings І Loyalty promotion: pins
  26. 26. І І More extensive training competitors І A low turnover rate compared to І A more personalized approach to the Progressive compensation package І Additional life insurance І Medical insurance І Stock options І Management bonus plan І Discounted Starbucks merchandise customer І Training program in the US for the best employees
  27. 27. І І І І І І І І І І І І І І І І І І І І Starbucks China: Starbucks Entry into China, Cornell university Starbucks Corporation Fiscal 2011 Annual Report Starbucks Reports Record Fourth Quarter and Fiscal 2012 Results Starbucks in China, ESADE Baidu Map: search as coffee shop, Starbucks China, U.B.C Coffee, Pacific Coffee, 85℃, Costa Coffee, MacCafe Starbucks coffee 75% costlier in China, China Beverage News China's Rising Imports of American Goods, US Global Investors, By Frank Holmes, November 11, 2011 China's new brew, By Daniel Allen : Starbucks to take on Nestle in instant coffee market (Liu Ying-feng and Staff Reporter) Starbucks Heads for Smaller China Cities as Coffee Shops Triple By Bloomberg News - Apr 1, 2012
  28. 28. І І І І І І І І І І І І І І 2009中国咖啡连锁企业20强,CPR Research 星巴克中国的营销战略研究,上海交通大学 星巴克的中国市场营销策略 2009年中国咖啡市场价格走势及影响因素深度调研报考 拓展中国市场 星巴克3年将增800家店 论中小企业的经营特点与战略选择—浅谈连锁经营在我国的发展及对 星巴克、麦咖啡齐齐涨价 Costa、太平洋咖啡按兵不动 중국마케팅, 김용준, 박영사 중국, '뜨겁고 진하게' 커피전문점 진출 경쟁, KOTRA 日経市場占有率 2011年版 Responsibly Grown Coffee <> Starbucks to Partner with Ai Ni Group to Brings China’s Yunnan Coffee to the World < m/article_display.cfm?article_id=617> McKinsey Consumer & Shopper Insights: Meet the 2020 Chinese Consumer. < wp-content/uploads/2012/03/mckinsey-meet-the-2020-consumer.pdf> Regional market segments of China: opportunities and barriers in a big emerging market. < hk/mkt/staff/gcui/Cui%26LiuJCM.pdf>
  29. 29. • Team Name: Starbucks China • Team Leader: Hyomin Seo No. 1 2 3 4 5 Name Role in the Project Hyomin Seo Starbucks overview, China market, Change, Company, Target Matrix, TCP, Positioning map, USP, Product, Price, Promotion Jin Ming Consumer, Competitor, TOWS analysis of Starbucks, TOWS analysis of UBC coffee, Segmentation, Target Matrix, USP, Product, Price, Promotion Chris Lopez Company, TOWS analysis of Starbucks, Segmentation, USP, Place, Promotion, People Serge Gawrieh Competitor, TOWS analysis of Starbucks, TOWS analysis of Nestle, Segmentation, USP, Place Clotilde Cavaroc China market, Company, Consumer, TOWS analysis of Starbucks, Segmentation, USP, Place, Promotion, People
  30. 30. Green activity in China Gift card in China
  31. 31. Coffee Stores in KOR
  32. 32. Source: McKinsey Consumer Report
  33. 33. Source: McKinsey Consumer Report
  34. 34.