Written by Coco
Nashan: "The recovery in China was faster than expected. ”
Consumption is slowly recovering, but the coffee industry is bustling, especially for chain brands.
Recently, Tims Tianhao Coffee, Luckin Coffee, and Cudi Coffee have reported news of expanding stores, and Starbucks, as a coffee giant, has also recently had new news.
On May 30, Starbucks CEO Nasihan visited China for the first time after taking office and introduced Starbucks' future China strategic vision at the exchange meeting. It is worth noting that the growth of the Chinese market has allowed Starbucks to adjust its pace and accelerate its layout.
Not long ago, Starbucks released its fiscal 2023 second quarter earnings. Starbucks' net revenue during the period was US$8.7 billion, an increase of 14.5% year-over-year, exceeding market expectations. Among them, the quarterly revenue in China was about $800 million, an increase of 11% year-on-year after deducting foreign exchange factors. It ended six consecutive quarters of single-quarter decline and returned to a positive growth track.
In addition, Nashan said at Starbucks' fiscal second quarter 2023 earnings briefing that the recovery of the China business is faster than expected and that it is expected to achieve the growth target set this year.
Regarding the layout of China's business in the future, there are two highlights worth paying attention to in the speech of Nashan Shi's visit to China, one is the store expansion strategy, and the other is supply chain investment.
Store expansion: Adhere to direct management, and the number of stores will reach 9,000 in the next three years
Regarding the most concerned store expansion, Nasihan said that Starbucks China will reach the goal of 9,000 stores in the next three years, but it will not stop there. In addition, in the expansion of stores, it still adheres to the direct management model. Starbucks' long-term vision is to open and operate independent Starbucks stores with a Starbucks business model that integrates into the Chinese market.
Compared with the franchise model or franchise model, the direct operation model can better ensure the store experience and beverage production, and at the same time shape deeper brand barriers. At the same time, the direct operation model has higher requirements for brand management and reduces the speed of opening stores.
In fact, adopting the direct management + franchising/franchise model is the practice of most chain coffee brands. For example, at least half of Tims China's new stores this year will be completed through franchise stores, and Luckin has also opened the franchise model with stores. Of course, the business model is good or bad, and which model is more suitable for the brand to expand its market share in the future needs to be verified for a long time.
Supply chain investment: Improve back-office support in the Chinese market
Regarding supply chain investment, Nasrhan said: "We are also the only specialty coffee company in China with a complete supply chain and a grower support center in Yunnan. In addition, he also mentioned that the "Starbucks Coffee Creative Park" announced by Starbucks in Kunshan in 2020 will be officially opened in September this year. The industrial park covers a total area of about 80,000 square meters (120 acres) and has invested nearly 1.1 billion yuan (US$156 million), including a bakery, distribution center and experience center.
There is one more point worth adding. In addition to the formation of the coffee creative park, which is a large rear of processing and distribution, Starbucks' long-term investment in Yunnan coffee is also very important for market expansion. Since 2012, Starbucks has established the first coffee grower support center in the Asia-Pacific region and China in Yunnan. Between 2022 and 2012, Starbucks purchased a total of 56,433 tons of coffee beans in Yunnan, and a total of 43,000 tons of Yunnan coffee beans were exported to Europe, America and Asian countries through Starbucks. Moreover, in the past 10 years, the qualification rate of Yunnan coffee beans has increased significantly from 20%~30% to more than 80% now.
The official completion of the Coffee Creative Park is the beginning of Starbucks' accelerated expansion, and I believe that Starbucks China will create more excitement in the future.