The world’s largest coffee chain just sank $1.3 billion in China, to gain full control of all its 2,800 outlets there.
Starbucks had 50 percent ownership of 1,300 outlets in east China, via a joint venture with two Taiwanese firms. With the buyout — its biggest ever acquisition, it said — it now owns the 1,300 fully, together with the other 1,500 it already owned.
The joint venture with Taiwanese convenience and department store giant President Chain Store Corp., and Taiwan-based food giant Uni-President Enterprises Corp, covered stores in Shanghai, Jiangsu and Zhejiang.
Meanwhile, the two firms are taking up Starbucks’ 50 percent stake in its 410 Taiwan stores, making them fully licensed outlets, rather than joint ventures, according to the Seattle Times.
Big plans for China
Starbucks is betting on its Chinese locations to drive growth, with plans to operate 5,000 locations in the country by 2021.
While its 16,302 cafes in the Americas (which includes Canada and Latin America) greatly outnumber its Chinese stores, the company said that business in China will eventually be bigger than its operations in the U.S.
“We are just getting started.”
“The growth opportunity in China is unparalleled,” said Starbucks CEO Kevin Johnson in a Reuters interview. “We are just getting started.”
“Unifying the Starbucks business under a full company-operated structure in China reinforces our commitment to the market,” Johnson added in a press statement.
Shanghai, with its 600 stores, has the most number of Starbucks stores compared with any other city in the world. said the company, It is also the first city outside the U.S. to host the chain’s ultra-premium Starbucks Reserve Roastery — its effort to appeal to discerning coffee connoisseurs with single-origin coffee and premium roasting methods.
The Shanghai roastery is reportedly 30,000 sq ft large — double the size of the original in Seattle — and will add to the 110 Starbucks stores with Reserve bars offering small-lot coffees in the country.
“The Reserve Roastery in Shanghai will champion innovation, bring many unique experiences to our customers, and advance our aspiration to build an ultra-premium Starbucks Reserve brand in China,” a Starbucks spokesperson told Mashable.
The chain also has a R&D center in the country, to create new food offerings that cater to more local tastes, like traditional Chinese mooncakes and an extensive selection of Chinese teas.
The move to double down on China comes as the Seattle firm saw its net income for the past three months to July fall 8.3 percent to $691.6 million.
That fell slightly short of analysts’ predictions, as sales increased only 4 percent last quarter — 0.8 percent short of analyst estimates.
It also shuttered some 379 Teavana retail stores in the U.S. and Canada, due to declining mall traffic. It acquired Teavana in 2012, and started replacing its default in-store Tazo tea with Teavana products.
The company said it will continue to sell Teavana-branded products in its Starbucks outlets, which brings around $1.6 billion a year in sales, reported Bloomberg.