Biggest Coffee Chain Starbucks Sets Up Facilities in China

Starbucks Corporation the world?s biggest coffee chain, will set up a farm and processing facilities in China?s southern Yunnan province, from which its coffee purchases have grown 20 fold in three years.

The farm and coffee-processing facilities will be built in Pu?er county, where the namesake tea is grown, Starbucks said in a statement today. It will also establish a farmers? support center, its first in Asia and third globally, following Costa Rica and Rwanda.

China will eventually be Starbucks? biggest market, Chief Executive Officer Howard Schultz said at a briefing in Yunnan today. He plans to have ?thousands? of stores in the world?s most populous country, he said in April, from about 400 now.

Yunnan plans to invest 3 million yuan ($452,000) to increase bean production to 200,000 tons by 2020, from the current 38,000 tons, according to the release. The province will also increase the acreage devoted to coffee almost fourfold to 100,000 hectares (247,000 acres), Starbucks said.

The coffee chain last year started selling its South of the Clouds Blend coffee, made with Yunnan beans. It didn?t disclose how much it plans to invest in the province.

Coffee chain operators are expanding in China, as increasingly affluent consumers buy more beverages in coffee shops. Starbucks is seeking to boost coffee consumption in China, which is at an annual 22 grams per person, compared with an estimated 3.3 kilograms in Japan, according to data from roaster Key Coffee Inc.

Coffee Sales Surge

Middle-income and affluent consumers in China will probably almost triple in 10 years, Boston Consulting Group Inc. said Nov. 8.

Sales at China?s coffee shops more than tripled to 35 million yuan in 2009 from 11 million yuan in 2004, according to data from Euromonitor International. Starbucks dominated the market with 69.8 percent market share last year, compared with No. 2 player Jiangsu Yueda Group Co. Ltd. which operates Costa Coffee restaurants and has a 5 percent share, according to the researcher.

The number of China?s specialist coffee shops rose to 613 last year from 220 in 2004. Starbucks outlets comprised 59 percent of the total, while Jiangsu Yueda controlled 6 percent by the end of 2009, according to Euromonitor.

Gourmet Master Co., operator of Taiwan?s largest coffee- shop chain, plans to increase its China outlets more than sixfold to 1,000 by 2015. China Resources Enterprise Ltd., which in June said it will acquire control over Hong Kong?s second-biggest coffee chain, last month said it plans to open as many as 1,000 Pacific Coffee shops in China.

Starbucks has about 800 stores in the Greater China region. About half are in mainland China, which doesn?t include Hong Kong, Macau and Taiwan. The restaurant chain?s first mainland China store opened in Beijing in 1999.