Dive Brief:
- Starbucks has 81 more stores abroad compared to its 14,606 domestic stores. Many of the coffee chain’s 14,687 international stores have landed in Asia-Pacific, which is expected to drive nearly half of global store growth fiscal year 2019, Restaurant Business reported.
- The coffee chain's fastest-growth market is China, where it has 3,500 units in 148 cities.
- Starbucks offers delivery at every location in Beijing, Shanghai and 11 other cities in China. Meanwhile domestically, the company will expand delivery to more than 2,000 locations by spring.
Dive Insight:
Starbucks has invested heavily in international markets, most notably in the Asia-Pacific region, especially since 2017 when the chain set out to add 2,000 units in China by 2021. The company opened its second and largest Reserve Roastery in Shanghai, after the first in Seattle, and another is expected this year in Tokyo.
Other restaurant chains also have bet hard on the region — from Yum Brands, which pioneered its Asian expansion in the '80s, to McDonald's and even Hooter's, which began a six-year, 30-store expansion in 2015. But as McDonald's proved, it isn't always easy to carve a space in Asian markets. After several years of expansion in China, the fast food chain struggled against local competitors and sold its controlling stake in its China and Hong Kong operations to a China state-backed conglomerate and a U.S. private equity firm.
As the world's largest coffee chain, Starbucks still holds plenty of clout, but it has faced increased competition from independent coffeehouses growing into mini-chains in the U.S. and homegrown upstarts abroad. In Thailand, a state-owned chain called Cafe Amazon surpassed 1,200 locations, most of which are at gas stations, and charges up to 30% less than drinks at Starbucks' 240 Thai stores, according to the Nikkei Asian Review. The American coffee giant faces similar competition from regional favorites like Vietnam’s Trung Nguyen, which services sandwiches and pho at many of its 2,500 locations.
In China, a quick-rising star has emerged in Luckin Coffee, a digitally savvy brand that started in early 2018 and grew unbelievably fast to 2,000 locations by the end of last year, according to Bloomberg. Luckin charges 30% less for a cup of coffee than Starbucks and regularly offers buy-one-get-one coupons, according to Bloomberg. Many of its locations aren't actually stores at all but rather delivery kitchens and pick-up counters, many in office buildings, to assist their guarantee of delivery in 30 minutes or less or else the order is free. Perhaps most strikingly, Luckin is cashless: customers can only order and pay through its mobile app, according to CNBC.
As entrepreneurship picks up across the globe, coffee consumption is growing more than 1% annually, according to the International Coffee Organization. Starbucks has definitely encouraged this growth, with global comparable store sales up 3% last fiscal year thanks to a 4% jump in ticket averages. But Americas and U.S. sales enjoyed a 4% bump in comparable store sales compared to 1% in China and Asia-Pacific. If tech-forward companies like Luckin pop up elsewhere, the Seattle-based company will have to find clever ways to gain more app users and mobile pay orders. Its rewards program has enjoyed 15% year-over-year growth and app orders now account for 14% of company-operated transactions in the U.S.
