One time I walked into a Starbucks in China and found that they’re selling authentic Chinese tea such as Biluochun green tea and Jasmine tea in tins. I found it strange, since Starbucks wouldn’t be my place to buy real tea. I don’t think most Chinese would either.
Recently, Marketing Interactive reports that Starbucks tries again to enter the tea market. Now with bottled milk teas sold in supermarkets and online. Is it gonna work? I’ve my doubts.
In 2016, Starbucks also introduced Teavana teas in China as reported by Bloomberg. This line of teas doesn’t really compete with the authentic Chinese teas, but rather competes with the bubble tea chains that that have been extremely successful.
Yet, I don’t think it worked out well. I don’t know any friends who go to Starbucks for an iced tea. I think it’s a mistake for a coffee person to believe that having a coffee background means that they can sell tea. Especially not in China. Taiwanese bubble tea shops probably understand Asian customers better when it comes to commercial tea drinks.
So in my opinion, the success of Starbucks still strongly relies on a strong global brand that represents the coffee culture. And they should stick to it. I’ve yet to see a really creative coffee tailored to the Chinese market, and I hope they do it before it’s too late. Remember, KFC had many years of success due to it’s Western image. The whole menu was completely new to Chinese, and thus entertaining to try. But today, that’s not enough anymore. They’ve to reinvent themselves and perhaps localise more.
Though we recently discussed the decline and exit of Nestea (a Coca Cola & Nestle Joint Venture) in China, Starbucks continues to sell the average cup of coffee above for 5 USD in China with high volume. With about 1100 stores the American coffee chain has achieved its last year’s target and has become the market leader in the coffee industry in China with another 400 stores opening by the end of 2015. This year it will shift its focus from central locations to expanding into local communities. According to the chain, employees will start promoting the brand by building connections with local communities, by being part of local projects and organizing volunteering activities.
“It’s a market where we continue to see traction around the Starbucks experience, and there are a number of things that are helping demographically and environmentally for Starbucks in China,” Mr. Maw said during a June 11 presentation at the William Blair Growth Stock Conference.
The growing middle class in China and the enthusiasm for the coffee culture are one of the main factors for Starbucks success. But that’s not it. The American firm is doing a great job to tailor its offerings to the local needs. Take for instance the recent Starbucks frozen dumpling offerings that has caught much attention in China, which is proof that the coffee chain is listening to its customers. Dumplings are traditional Chinese snacks.
Besides it’s drinks and sweets, Starbucks adjusting it’s employee policies. The coffee giant is redefining what it means to be family-friendly. As families play a tremendous role in life and career choices in China, Starbucks is including the family members in the career conversations by organizing a Partner Family Forum. This indeed proofs that a company with its own strong flavor of corporate culture is tweaking it to fit China’s work life customs, which incorporate the family.
Though all the news above is good, we do need to mention that there is one product line that’s not selling well: Tea. The coffee chain hasn’t succeeded until today to attract Chinese tea lovers to it’s stores. Starbucks, offerings are awkward to the Chinese who are confused about what Starbucks tea stands for. To succeed, the chain has to focus on creating a tea line that looks more foreign, or it will face a similar fate as Nestea.
Starbucks, the global coffee giant is opening it’s first tea bar in New York, according to the Huffington Post. To industry insiders this doesn’t come at a surprise, as the company successfully managed to commercialize the coffee culture worldwide, it’s now planning to do the same with tea. In addition, this is a logical step after the company acquired about 300 Teavana shops.
The Seattle-based company says Teavana Fine Teas + Teavana Tea Bar will serve sweets and other foods including flatbreads and salads ranging in price from about $3 to $15. Drinks will include novelties such as a Spiced Mandarin Oolong tea, according to a preliminary menu. Huffington Post
There is absolutely no doubt that a company like Starbucks has the management talent and marketing skills in the beverage industry to pull it off and make Teavana expand rapidly. However, years of experience in the coffee industry could at the same time results in blind spots that Starbucks is not able to recognize in the tea industry.
What I find even more interesting is whether Teavana will successfully enter traditional tea markets such as Japan and China. One reason why they won’t succeed is the fact that there is almost no Starbucks coffee shop in Italy, the traditional coffee country. Will the Chinese and Japanese accept commercialized tea?
You might think that Chinese people are only used to drinking tea, but the middle class is growing. It’s exactly this segment that is who is curious about western goods, including Coffee. You don’t have to like it, but if you hold a cup of coffee with the Starbucks logo, you feel more sophisticated. Starbucks has become a kind of status symbol in China, where a smallest Frappucino sells for about 5 USD.
According to Investorsplace.com, it’s therefore not a surprise that the successful coffee chain has announced the news that they are aiming for over a 1000 stores in 2013 in the Middle kingdom.
One of the main reasons for Starbucks’ success, is the fact that Chinese tea companies haven’t been able to come up with a successful tea chain that gives the busy middle class the convenience of consistent quality. It’s very similar to how the American Pizza Hut has successfully entered the Chinese market, while the average Italian restaurants stay a small scale family business. Traditional tea houses risk the danger of being regarded as places for the elderly to spend time chatting and playing cards.
Starbucks is not only the foreign player in China. Costa an UK coffee firm is quite aggressive, opening many new stores close to Starbucks. It entered the Chinese market in 2006 aiming to open 2500 stores in total in 2015. More challengers will definitely follow.