Starbucks' modest growth in China raises concern over key market

The Seattle-based chain now has more US locations than McDonald

CHICAGO: Starbucks Corp.’s chief financial officer said same-store sales growth in China could be as low as 1 percent over the long-term -- a pace that raises concern about one of the coffee behemoth’s most important markets.

Same-store sales, which is a key measure of restaurant industry success, is seen growing 1 percent to 3 percent in China over the long-term, CFO Patrick Grismer said at an event in New York. That’s slower than the 3 percent to 4 percent growth seen for the U.S. and the rest of the world.

Key Insights

Now that Starbucks is one of the world’s largest restaurant companies, it is focusing to China and the U.S. for the lion’s share of its future growth.

 With Starbucks pouring resources into opening new restaurants in China, the long-term forecast raises questions about whether the company is truly catching on in the Asian nation. 

Starbucks expects to have 6,000 restaurants in China in about four years, with 80 percent of sales growth there expected to come from the new stores. 

This physical expansion will be complemented by delivery. In its home market, Starbucks is trying to end the “cafe on every corner” stereotype by focusing on regions that are relatively under penetrated, such as the Midwest and Sun Belt.
 
The company is also expanding delivery via an existing partnership with UberEats.

Starbucks shares fell as much as 3.6 percent to $64.50 in late trading in New York on Thursday. The stock has gained 17 percent so far this year through Thursday’s close.

Starbucks said it has expanded its delivery program, which uses Alibaba Group Holding Ltd.’s Ele.me platform, to 2,000 stores across 30 cities in China since launching three months ago. 

Starbucks is in a battle with local upstart Luckin Coffee to reach more customers through delivery service. - Bloomberg