Starbucks to convert Chinese tea drinkers into coffee lovers

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SHANGHAI--Starbucks will begin to brew in Shanghai next month --opening the first of 10 shops planned for this year and 50 here within the next five years -- as the Seattle favorite tries to sell all, or at least most, of the coffee in China.

The Shanghai move by Starbucks Coffee International, a wholly ownedsubsidiary of Starbucks Coffee Co., follows last year's beachhead on the mainland, with nine stores in Beijing. Starbucks recently signed a joint venture to set up operations in Hong Kong, and it is already entrenched in Taiwan.

"We've had substantial business to date in Beijing and are planning forfurther expansion into other major Chinese cities,'' says Peter Maslen,president of Starbucks Coffee International.

Starbucks partners here are Shanghai President Coffee Corp., part of Taiwan's President Group, and Shanghai Tobacco Group's Luwan Tobacco Sugar & Wine Co. Ltd. President operates 35 Starbucks' outlets in Taiwan.

"Starbucks is now the benchmark for quality coffee in Taiwan," says Jason Hong, President's Shanghai marketing manager. He is confident the stores here, each of which will require an initial investment of about $300,000, will be just as successful. The only other large coffee chain in town is Japan's Manabe, and Hong believes the quality of his product will make it a clear winner.

Starbucks' flagship store will be opened on Huaihai Road, the city'strendiest shopping street, where foreigners and upscale Chinese are used to paying higher prices for Western goods. Mr. Hong expects expats who are familiar with the "Starbucks experience" to be among the first wave of customers.

"But with 50 stores here eventually, we cannot rely on foreigners alone; we must introduce the Starbucks coffee culture to Shanghai residents," he adds.

The conversion -- from tea to coffee or from one cuppa Joe to another -- will come primarily from word-of mouth, he said, aided by promotions surrounding the opening of new shops.

An affinity for tea isn't the only cultural characteristic challengingStarbucks. Like other Asians, Shanghainese are heavy smokers and tend to light up when they sit down for a drink and a chat. Starbucks has a strict no-smoking policy.

"The aroma of our coffee is one of our competitive advantages; it is one of our 'products,'" says Mr. Hong. "You cannot have a complete Starbucksexperience if you have smoky air. We need to win people over on the importance of aroma."

Copyright April 2000, Crain Communications Inc.

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