Dive Brief:

• Starbucks unveiled its first Reserve Bakery Cafe in China, combining an all-day cafe with Italian Princi food with Starbucks' Reserve Roastery experience, according to a press release.
• The cafe also features an expanded menu of mixology drinks, including coffee and tea-inspired cocktails, Italian wines and beers and Italian classics such as Aperol Spritz.
• This is the first Starbucks location to have an evening social cocktail experience with small bites in China.

Dive Insight:

Starbucks is upping its game in China, where it plans to add 2,000 units by 2021. China is its second largest and fastest-growing market, President and CEO Kevin Johnson told investors during a January earnings call. Its strategy in China is to adapt as it learns more about the coffee culture, expand into new and existing cities and provide a differentiated experience either through its stores or new channels such as Starbucks Delivers, Johnson said during the call.

The all-day cafe certainly seems to be falling under this strategy. While it previously opened its Reserve Roastery in Shanghai last year, the cafe will provide a new experience with made-to-order food, which could give it an edge against the likes of Luckin — which has been aggressively growing throughout China and offers delivery and coffee at a lower price point, but doesn't really offer much in the way of food or alcohol.

The addition of a more experiential cafe could help Starbucks continue to boost sales in China, which slowed in recent quarters due in part to Luckin's growth. Starbucks has been increasing comparable store sales globally by 4% during the first quarter of the fiscal year 2019, but China comparable store sales were only up 1% even though total China stores increased 18% compared to a year ago, according to a company release.

Food also isn't new to Starbucks. It's been experimenting with food since 2003, according to Forbes. It added lunchtime bakery items in the U.S. when it acquired La Boulange bakery in 2012. In 2018, the company said it will focus on doubling its food business by 2021.

Some of its China strategies have been translating to the U.S. It has already built out its popular delivery channels in China, and is now rolling out delivery to the U.S. via Uber Eats to 2,000 locations.The company also recently opened a Reserve Roastery in New York, which also has a Milanese Princi bakery with artisanal foods. Given this development, the company could easily add an all-day cafe in New York, especially if it proves to be successful in China.