China Embracing Starbucks Coffee (SBUX)

| About: Starbucks Corporation (SBUX)

Coffee retailer Starbucks (ticker: SBUX) has had a presence in China since 1999. Chairman and Chief Global Strategist Howard Schultz had the following to say about his company's growth in China during management's Q4 2005 earnings results conference call on November 17th:

Let me begin by highlighting our progress this year in China, one of our most exciting international markets. Having successfully established a strong and increasing brand presence in China, with over 200 stores in Mainland China and in Hong Kong, and 150 stores in Taiwan, we are rapidly building on the foundation in this attractive market with a keen eye on growing both our license relationships and company-operated strategy.

To better capture this opportunity and realize greater long-term financial returns, we increased our equity ownership in southern China to 51% in Q4. We view China as one of our biggest growth opportunities and believe it could ultimately be our largest international market. As evidence of our confidence in the opportunities awaiting us, this year we opened our first company-operated location in China in the city of Qingdao. Following this expansion we were excited to open company operated stores in Dalian, one of the major cities in Northern China and in Chengdu in western China this fall.

While visiting there in September, I was invigorated by the ongoing acceptance of Starbucks from both customers as well as our partners. In a country that is primarily known for tea, customers have warmly embraced Starbucks coffee as well as the Starbucks experience. The acceptance that we have achieved since entering Beijing in 1999 has exceeded even my own high expectations, and I must say we have only just begun. We continually strive to build relationships in the communities in which we operate, and China is no exception. In recognition of the country’s long and rich tradition of placing an importance on education, during my trip we announced the establishment of the Starbucks China Education Project, $5 million commitment to support educational programs in China. This is just another example of our long-term commitment to being a socially responsible company wherever we do business.

This week we were very pleased to announce that Jinlong Wang has rejoined Starbucks and has been appointed President of Starbucks Greater China. Due to his previous experience leading Starbucks’ international development as well as his firsthand knowledge of the business and consumer environment in China, Jinlong is uniquely qualified for leading our strategic efforts in this very important market. We warmly welcome him back to Starbucks. We continue to invest in our infrastructure and partner development in China and are laying the groundwork to capture the numerous opportunities this market has to offer us in years to come.

Comment: You can read the rest of Starbucks' Q4 2005 earnings conference call transcript here.


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