Starbucks in China: Let a thousand Starbucks bloom?

Posted Oct 24th 2006 9:10AM by Douglas McIntyre
Filed under: Before the Bell, International Markets, Deals, Competitive Strategy, Starbucks (SBUX), China

During the cultural revolution, Chairman Mao said that China should let a thousand flowers bloom. He wanted the country's cultural reach to extend from one end of the country to another.

Now, it would appear that the dead communist leader has competition from none other than capitalist America in the form of Starbucks Corp. (NASDAQ:SBUX). The big coffee company has stated that it intends to have thousands of stores in China as part of its march to hit 40,000 stores worldwide.

Each journey must begin with just one step, so Starbucks is buying 90% of Beijing Mei Da Coffee Co., which operates 60 Starbucks stores on the mainland out of the 190 stores Starbucks has there.

It remains to be seen whether Starbucks will run into some of the problems that Wal-Mart Stores, Inc. (NYSE:WMT) has. In particular, the state-backed labor-union that has rounded up all of the Wal-Mart workers and passed out union cards.

Instead of labor benefits, maybe Starbucks could just offer free latte.

Douglas McIntyre is a partner at 24/7 Wall St. He does not own securities in companies that he writes about.

Tags: china, sbux, starbucks, wal-mart, wmt

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Reader Comments (Page 1 of 1)

10-24-2006 @ 11:08AM

Michael Schneider said...

Looks like a good move for Starbucks. The question of whether Chinese will move from tea drinking to coffee is another story along with the resistance to big companies in China. On the plus side-- improved US-China relations deriving from cooperation in the Korean situation could help some US sellers in China. There are many free items on China at www.Barreloworld.com.

11-02-2006 @ 8:38AM

The China Expat said...

Walmart and China are completely different beasts. Also, Starbucks has pretty decent wages for a Chinese employer. For more in depth analysis of Starbucks in China, check out the Starbucks in China portion of my website above.

I firmly believe Starbucks will do extremely well in China long term, better than the more positive of estim ates out there. Yet in the short term they could face some serious problems with a consumer who is about to get knocked flat by continuously declining housing prices.

I do know if it is knocked down significantly that I will be buying some Starbucks stock. Otherwise, I'm sure there will be other better opportunities that pop up later on.