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On Saturday nights in Singapore's crowded Chinatown district, families traditionally gather at outdoor cafes to share pieces of duran, a huge watermelon-like fruit carved up with a knife resembling a small machete.

Just a few blocks away, however, in the sleek Raffles Place mall, a Western tradition is taking hold among trendy young Asians who would rather sip cappuccino and cafe latte at Starbucks.

The "Starbucks experience" is heading east -- Far East -- and despite the region's current economic hardship and its centuries-old preference for tea, the U.S. coffee chain is forging ahead with its first overseas expansion push.

So far, Seattle-based Starbucks Coffee Co. has found choppy seas on its trip to Singapore and other points in the Pacific Rim.


The coffee retailer opened its first Asian store in Japan last August, just as the region's economic crisis hit. But Starbucks is going forward with its investment blueprint anyway, assisted by local partners in each market.

It already has 40 retail sites in the Asia/Pacific region, including nine in Hawaii -- which Starbucks classifies as part of the Pacific Rim rather than the North American market. Starbucks plans to have 200 stores in the region by the turn of the century.

Such numbers pale when stacked against Starbucks' 1,400 retail locations in North America, where it continues on an aggressive expansion path.

"We're looking at the Pacific Rim markets as a long-term investment," said Jane Melvin, international marketing director.

Like the seven other Starbucks sites in Singapore, the Raffles outlet is invariably packed with a mix of Singaporeans, expatriates and tourists eager for a caffeine hit and a touch of the Starbucks experience so popular in North America.

Singapore -- the only Asian market so far to use media advertising to promote its Starbucks outlets -- was one of the first new markets selected outside North America, alongside Japan, the Philippines and Hawaii. In recent weeks, the first site in Taiwan opened in downtown Taipei, and plans are under way to launch Starbucks in New Zealand, South Korea and Thailand later this year.


Ms. Melvin admitted the Asian expansion plan was first drawn up at a time when the region seemed rife with opportunity and Europe's coffee markets -- already staked out by potential rivals ranging from Seattle Coffee Co. in London to sidewalk cafes in Paris -- were comparatively flat and saturated.

"We focused on Asia because we were excited about the opportunities, but principally because we felt comfortable there," Ms. Melvin said. "Seattle is a Pacific Rim city, and a lot of companies go back and forth between there and Asia."

Coffee consumption is growing faster in Asia than in Europe or Latin America, though Starbucks hopes eventually to enter both those regions as well. According to Datamonitor, coffee sales in Asia rose 33.9% from 1992 to 1996, while sales in Europe grew 23.2%.


All is not economic ruin in Asia, of course. There's still a middle class that can splurge on a frothy Frappuccino, and Starbucks is unfazed by many Asians' preference for tea. Japan and Korea traditionally have "a huge coffee culture," Ms. Melvin said, and Starbucks menus in other markets offer some alternatives to match local tastes, such as fruit juices or steamed milk.

Calamansi juice, a traditional fruit drink that tastes like a mixture of lime and honeydew melon, has been added in the Philippines, for example. Japanese stores serve a Double Squeeze fruit juice, and in Hawaii consumers can order a customized version of Thai iced coffee. The stores also serve different varieties of sandwiches and sweets according to local preferences.

Despite the calamansi juice and other local touches, a Starbucks cafe latte aficionado from the U.S. would probably feel at home in one of the new Asian outlets, even though they are actually run by local partners, a big change for Starbucks. The company's North American sites are all wholly owned, except for those in airports or on university campuses. The Asian stores are opening under a variety of agreements with local partners, usually as joint ventures or franchises.

In Taiwan, for example, Starbucks has partnered with President Foods, a leading food marketer.

An inability to find a good local partner explains why Starbucks has not yet entered Hong Kong, one of the most affluent, cosmopolitan markets in Asia; or China, the biggest.


The local partners are largely autonomous when it comes to marketing, since Starbucks sends a temporary market development consultant into each new market, but transfers no permanent staff.

To promote Starbucks, some local partners hire outside companies to handle event management, public relations and design, but the bulk of the marketing budget, which Starbucks will not disclose, goes into product, training and promotional materials rather than media advertising.

The only ad budget is found in Singapore, where local partner Bonvests Holdings broke with Starbucks' tradition of doing little or no advertising by hiring Saatchi & Saatchi Singapore.

Outdoor and transit ads are being used in Singapore, with newspapers ads announcing each new store. And, in the process, enticing more consumers to put down their duran-slicing knives and pick up a latte.

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