Expansion plans

Opening a Starbucks coffee shop requires an investment of up to 2 million yuan. Now, under Beijing Meida, a joint venture authorized to award franchises in Tianjin and Beijing, there are 49 stores in Beijing and 10 in Tianjin. Against a time span of seven years, that equals a new shop in these two cities every one and a half months, which draws envy from Starbucks headquarters in the United States.

Since 1999, Starbucks Coffee International Inc. has established three joint ventures in China, including the one in Beijing in charge of granting franchises in Beijing and Tianjin, one in Shanghai and one in Guangdong, in charge of operations in the southern provinces of China.

Since 2003, Starbucks International, a wholly-owned subsidiary of Seattle-based Starbucks Corp., has begun to buy back shares in the Chinese joint ventures. As of now, it has bought 50 percent of the Shanghai company and 51 percent of the Guangdong company. A China headquarters of Starbucks Corp. has been formed, which has moved to open new shops in regional business centers, including Chengdu, Chongqing and Dalian.

Negotiations on a stock buyback between Starbucks International and Beijing Meida are ongoing. According to Charles Wang, Starbucks plans to buy back at least 50 percent of the stock of Beijing Meida. This will usher in a new era of Starbucks in China by putting all development under one command.

"Obtaining a controlling interest enables Starbucks to draft a grand plan for the company's development in China," said Yang Deyong, a professor at Beijing Technology and Business University.

Starbucks' China headquarters has attached more importance to regional centers. It is expected that in the near future Starbucks cafes will be seen across the country, like the fast food chains McDonald's and KFC.

Yet, however fast Starbucks develops in China, the prices it charges mean that it is affordable to only a small segment of the population.

Data from the National Bureau of Statistics indicate that in January, the monthly per-capita income in China was 1,121 yuan, while per-capita income in Beijing and Shanghai was a little above 2,000 yuan. In a Starbucks outlet in Beijing, a small cappuccino or latté is priced at about 20 yuan.

Although price is not the only factor determining whether Chinese people will shift from teahouses to Starbucks, it remains a vital factor in stimulating a change in people's drinking habits. For China's middle-class and modish youth, Starbucks is nothing less than part of their life, although it is a luxury for most Chinese.

Starbucks has no plan to lower the prices of the food and beverages it sells. In fact, Beijing Meida and Starbucks International disagree on introducing a populist approach. The latter noted that the most powerful weapon in marketing in Chinese cities is to set high prices for consumer products, since in China "expensive" is usually the byword for high quality and luxury.

This business strategy, however, will keep ordinary Chinese a long way from a Starbucks coffee.