To what extent can/should Starbucks customize their offerings to local tastes and preferences? What are the risks of extreme customization?

Asia, particularly China, is well known for its love of tea. So it may be a bit surprising how enthusiastic Starbucks is about the Chinese market. Consider the following quote from a Starbucks executive:

I am so excited about China right now I can hardly stand it. I was in Shanghai a few weeks ago. The stores there are full of customers. I thought China would always be a great market for us eventually. But it is clearly a tea-drinking society—unlike Japan, which we think of as a tea-drinking society but they also drink a lot of coffee. In China, that really isn’t true. I thought it would be a much longer education process. But they’re picking that up so fast.

And there certainly is reason for excitement. China is a major consumer market. With an overall population of around 1.3 billion, rising incomes, and increasingly global attitudes, particularly in the major cities, numerous companies around the world are clamoring to tap this gold mine.
However, the reality of China’s coffee market is still far behind the hype. Consider the fact that despite a 90 percent growth in coffee sales in China in recent years, per capita consumption is still under one kilogram per person compared with four kilograms in the United States. Tea is still the number one beverage in China (by volume), is a part of China’s national heritage, and is strongly embedded in their culture. Here is how one expert on food marketing put it:

Despite the potential of a 1.3 billion population base, coffee marketers are wary of the diffi culty in transforming a tea-drinking nation into a coffee-drinking nation. Tea is the Chinese national drink and deemed to have medicinal qualities that coffee does not have, which means that it will continue to be an integral part of Chinese daily life in the next two or three decades. Added to this the fact that coffee is still prohibitively expensive and not familiar to the majority of the population, the indications are that despite potential being massive, the growth of coffee will continue to be slow.

In a population so large, it might surprise you to know that recent statistics put the number of Starbucks outlets in China at nearly 200, a drop in the bucket compared with over 6,500 Starbucks-owned stores in the United States. Various factors will infl uence the Chinese coffee market and must be considered in Starbucks’ marketing strategy.