Starbucks on the move

Coffeehouse chain hires ex-McDonald's marketing exec

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SHANGHAI--McDonald’s Corp. veteran Shantel Wong joined Starbucks in Shanghai on Feb. 10 as VP-marketing for Greater China in the coffeehouse chain’s latest move to transform the mainland into a nation of coffee drinkers.

Her first week on the job has been a hectic one, however, as her new boss Howard Schultz has spent the last few days traveling in China. Starbucks’ founder and chairman has become increasingly vocal about his determination to make China the company’s No. 2 market behind North America.

Although China has been nearly synonymous with tea for centuries, urban consumers show a surprising predilection for java. Starbucks has opened 386 sites in 18 mainland cities as well as Hong Kong and Taiwan since 1999, and they are nearly always packed.

Unlike American consumers who prefer to get their coffee on the go, and often buy coffee beans and merchandise alongside drinks and snacks, Chinese linger in the stores for hours, chatting with friends, surfing online and soaking up the Western atmosphere.

The brand's attributes point to wealth, status and success, making it a beacon for young affluent students, expatriate, travelers and multinational executives, explained Christine Day, the company’s president for Asia/Pacific.

She calls China, "the next great frontier,” because with eight million people entering the middle class, an emerging demographic of so-called young capitalists are becoming the Chinese version of Yuppies.

But growth will depend on Starbucks expanding into tier two cities like Chongqing, where Mr. Schultz will oversee the grand opening of a new store on Feb.16. Those cities attract fewer foreigners, so stores there will have to rely more on Chinese customers, but locals in smaller cities are less likely to have developed a taste for coffee and will have less disposable income to buy $5 cups of coffee.

Even in Shanghai, “Starbucks is pricey enough by local standards that some young Chinese will save their paper cups from Starbucks and fill them with something cheaper, or tea, because they like to be seen walking down the street or going into work holding a Starbucks cup,” said P.T. Black, a partner at Jigsaw, a youth trend consultancy in Shanghai.

The company has seen its share of controversy in China as well. In 2004, it sued a local firm for trademark infringements, because the rival chain’s Chinese name, Shanghai Xing Ba Ke Coffee Shop Co, was almost an exact translation of the Mandarin name chosen by Starbucks in China. (Local courts ruled in Starbucks’ favor earlier this year, a rare victory in China for a multinational company.) Back in 2000, some Beijingers (and expatriates, too) kicked up a fuss when the U.S. chain, now a global symbol of American consumerism, opened a restaurant in Beijing's sacred Forbidden City.

Making the brand attractive to a wider audience falls to Ms. Wong, who was drawn to the company for its “great brand and strong leadership.” She declined to elaborate on her immediate plans at Starbucks, but she will rely on skills honed at McDonald’s, where she faced similar challenges while marketing hamburgers and fries to consumers raised on chicken, pork and rice.

For the last six months of 2005, she was responsible for the fast food chain’s Beijing Olympics marketing platform. Before that, Ms. Wong, a cheerful, energetic Hong Kong native, was chief marketing officer for McDonald’s China.

During her ten years at McDonald’s in China and Hong Kong, she helped localize its menu with items like seafood soup, spicy chicken wings, red bean sundaes and taro pie.

She also gave a local slant to its global "I'm lovin' it" ad campaign. In place of U.S. pop star Justin Timberlake, who fronted the campaign in Europe and North America, McDonald’s China enlisted Chinese singer Wang Leehom to sing a Mandarin version of the jingle. It also developed outdoor interactive bus shelter mixing decks, which played Wang’s tune--kind of a Chinese rap song--and allowed people to add their own 'scratches' and 'riffs.’

Starbucks needs local market savvy and retail experience to grow at the pace set by Mr. Schultz, whose commitment to China was underscored this week with the announcement of a $1.5 million (12 million RMB) program with the China Soong Ching Ling Foundation. The grant, aimed at helping students in need and their teachers in rural China, will help about 3,000 teachers and thousands of students by 2010.

“We are as passionate about our commitment to our communities as we are about achieving financial success,” said Mr. Schultz at the signing ceremony in Beijing earlier this week.

Contributing: Advertising Age reporter Kate MacArthur in Chicago.

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