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As other US companies flee China, Starbucks marches in

It has found a way into the country's culture as well as the good graces of the govt

Andrew Ross Sorkin | NYT 

As other US companies flee China, Starbucks marches in
Starbucks is opening more than 500 stores a year in China, which amounts to more than one new store a day. Photo: iSTOCK

does very little business there. has agreed to sell its business and license its name there. Coca-Cola, after investing heavily, sold its bottling unit there. Where is “there”? China, of course.

At a time when many United States have been beating a path away from China, worried about censorship as well as political and economic volatility, one company has been quietly going the other direction:

Amid last week’s busy news cycle — filled with company earnings reports and chaos in Washington — made a momentous deal that was largely overshadowed. It bought out its long-time partner in its Chinese operation (making it the sole owner) and detailed its huge expansion plans for China.

Consider this mind-boggling statistic that I culled from the company’s statement last week about its Chinese ambitions: is opening more than 500 stores a year there — which amounts to more than one new store a day. is creating some 10,000 jobs in China annually. In Shanghai alone, there are already 600 stores. To put that in perspective, New York City has about half as many stores as Shanghai.

“When people ask me how much can you really grow in China, I don’t really know what the answer is, but I do believe it’s going to be larger than the US,” Howard Schultz, Starbucks’s chairman, told me on Monday by phone.

Schultz was headed to China that afternoon, preparing for a series of meetings in Shanghai. That’s where the company is planning to open a 30,000-square-foot coffee emporium in December, one that Schultz believes “will have a larger consumer impact than the opening of Shanghai Disney”.

The story of in China is a nearly 20-year journey that may be a case study for US that have struggled to do business there.

has found a way into the culture of China — as well as the good graces of the Chinese government — by investing heavily there, paying significantly higher wages than competitors, and extending its employee ownership benefits to Chinese workers. The company has also been offering housing allowances and health care benefits and, unusually, offering critical illness insurance for the parents of employees and inviting those parents to an annual meeting of the company’s Chinese staff. Today, China is run by a female executive, Belinda Wong.

All these efforts have built up an extraordinary level of trust. But they took time and money — too much money, some shareholders complained in the early days of the endeavour.

“The years of losses built pressure from both within and from the street to leave and abandon the China market,” Schultz said. Part of the company’s challenge, he added, was the need to teach an entire country known for its tea about the culture of coffee drinking.

faced many of the same pressures in China as Yum Brands, the owner of KFC, and Last year, spun off its China unit under pressure from shareholders who were concerned about the costs and volatility of trying to expand a business there.
© 2017 New York Times News Service

First Published: Tue, August 01 2017. 23:14 IST