China will soon become Starbucks' second-largest market. Will growing an infrastructure in a tea-drinking country help grow the bottom line?
China will surpass Canada to become Starbucks’ second-largest market after the United States. But will mostly tea-consuming China be a good long-term growth play for the coffeemaker?
The Seattle-based company announced the opening of two flagship stores in China’s capital city of Beijing. One will be a 24-hour store in Taikoo Li Sanlitun for those who need a 3am caffeine jolt before buying at some of the nearby luxury stores.
But China remains a tea-drinking society. The country consumes a quarter of the entire planet’s annual tea production of four million tons. That breaks down to nearly 1.5 pounds of tea for each of the country’s 1.35 billion people.
On the other hand, China’s annual coffee consumption of 0.1 kg (3.5 ounces) per person is relatively sleepy compared to the 9 lbs. each American drinks every year. (Both of those pale in comparison to Finland’s annual consumption of 26 lbs. per capita.)
“Keep this in mind: per capita coffee consumption in the US is three cups of coffee per day,” says Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson. “That’s over 1,000 cups of coffee per year.”
“In mainland China, it’s four. Not four cups a day, not four hundred a year – four cups of coffee a year. Now, somewhere in the middle there lies a trade and that trade continues to be Starbucks.”
Ross says the charts are bullish for the company but do the fundamentals agree?
To look into the story behind Starbucks is CNBC contributor Gina Sanchez, founder of Chantico Global.
Will the expansion into China be a worthwhile pursuit for Starbucks? Watch Sanchez and Ross analyze the company to find out more.
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