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 societyunlike 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 difficulty 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 mightsurprise 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 influence the Chinese coffee market and must be considered in Starbucks' marketing strategy. DEMOGRAPHICS AND GEOGRAPHY Pure population statistics don't tell the whole story. The potential 1.3 billion population base is largely rural and lower income. The economy is growing and the middle class is increasing in size. The middle- and upper-class Chinese tend to be located in the major cities, such as Guangzhou, Beijing, and Shanghai, where incomes have risen substantially. One estimate puts the number of Chinese with "middle-class" incomes at 50 million and growing, with incomes expected to increase rapidly in coming years. The coastal market between Shanghai and Shenzhen represents roughly 200 million people and is therefore highly attractive.

COMPETITION Beyond tea, which is clearly a major "beverage" competitor, challengers in terms of the "fresh-ground" market include Pacific Coffee (Hong Kong), Blenz Coffee (Canada), Figaro (Philippines), and McCafe (a McDonald's coffee house). However, instant coffee is the major player. According to one report, this is because coffee is just taking off and the Chinese don't yet appreciate the taste of coffee or the taste difference among types of coffee. Currently, inexpensive mixes (coffee, milk, and sugar) are popular as a timesaving device among time-pressed professionals. In fact, Nescaf (a Nestl brand) holds nearly half the market share and has become the Chinese generic term for coffee.

CULTURE, HABITS, AND PERCEPTIONS Obviously, a population of 1.3 billion is impossible to generalize. However, some interesting information is available as a guide. General insights come from a recent survey of consumers in the four Chinese cities of Beijing, Shanghai, Chengdu, and Shenyang by Kurt Salmon Associates. The survey found that the top five factors in choosing a brand were "high quality," "good for health," "cares about customer," "fitsself-image," and "fair price." Given the highly collectivist nature of Chinese culture, the self-image component is significant. Another general insight regarding foods and beverages is the notion of balance, as embodied by the concepts of yin versus yang. Frito-Lay learned its lesson when it found that certain flavors and colors are associated with yin and others with yang. In terms of seasonal marketing, the difference is critical since yin is associated with cool and yang is associated with hot. FritoLay developed a cool lemon chip with pastel packaging to highlight yin for summer months since its traditional fried potato chip was associated with yang. More specific insights in terms of the coffee and food market, especially for younger, wealthier, professional Chinese, include: Enjoy eating out. Associate coffee with Western lifestyles. See coffee as a fashionable drink. Associate Starbucks with wealth and status. Prefer food products from local (versus foreign) merchants. Enjoy sweet-tasting foods and beverages, particularly desserts. As if the Chinese market were not enough, Starbucks is finalizing a deal to enter India. Clearly, it is betting on the Asian market to fuel growth as the U.S. market matures. Whether Starbucks can fully capitalize on this bet remains to be seen.

Find solutions for the challenges of Starbucks in china.

NEED CONCLUSION AT THE END OF ANSWER