Starbucks China Expansion: New Brew Needed to Serve Up Success

Since  I’m writing this from a Starbucks (Nasdaq: SBUX) in Shanghai, I figured I’d start the day with a posting on the ubiquitous coffee chain’s plans for a major expansion in China — and its chances for success. The China Daily reports that Starbucks, following in the footsteps of other big global names like Nokia (Helsinki: NOK1V) and Dell (Nasdaq: DELL), is preparing to blaze a trail into China’s 2nd and 3rd tier cities, with plans to open 1,500 new stores by 2015. This kind of hyper expansion sounds very typically Starbucks, and its success or failure will depend highly on getting the recipe right for cities that are far more cost sensitive than Beijing or Shanghai. The report says Starbucks will develop more cakes and tea drinks as part of the drive, presumably to better suit smaller town tastes and wallets. Let’s face it: people go to these stores as much as a social thing as they do for the food, so there’s no reason people in smaller towns won’t want to socialize. The main issue will be getting the price right, as no one in these towns will want to spend a third of their monthly paycheck simply for the right to socialize.