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Starbucks CEO Sees Decades of Growth From Its Chinese Expansion

10/10 2017 11:15

Asian nation is coffee chain’s biggest sales opportunity
Kevin Johnson also counting on innovation to ‘stay relevant’

China is Starbucks Corp.’s biggest growth opportunity, and its expansion there could last decades without letting up.

That’s the view of Chief Executive Officer Kevin Johnson, who spoke with Bloomberg’s Emily Chang at the GeekWire Summit in the company’s hometown of Seattle. Though the U.S. will remain a key market, Starbucks’ crusade to spread lattes and macchiatos across the Asian nation is key to its future.

“China is our second-largest and fastest-growing market,” he said. “We can build new stores in China for decades and still have opportunity for growth there.”

Starbucks doubled down on the market in July when it announced plans to buy out the partners in its East China joint venture. The company agreed to acquire the remaining 50 percent of the business in a $1.3 billion transaction, giving it complete ownership of about 1,300 cafes in Shanghai and the Jiangsu and Zhejiang provinces.

The company is betting that China’s growing middle class and urbanization will boost demand for coffee in a tea-loving country. Slowing sales in the U.S. have only added pressure to go big overseas. Starbucks has set a target of operating 5,000 cafes in mainland China by 2021.

Johnson, who joined Starbucks after a career in the tech industry, also sees innovation as key to fueling sales. That includes reformulating drinks, trying new store designs and enhancing its mobile app.

“The tech industry and the coffee industry certainly have two different business models, but they have a lot in common,” he said. “We have to innovate to stay relevant.”