Starbucks (SBUX) executive chairman Howard Schultz expects that there will one day be twice as many Starbucks stores in China than in the U.S. as the country becomes the “single biggest growth vehicle” for the coffee giant.
“In 2000, we had approximately 3,000 stores in the U.S., where it took us the better part of 18 years to achieve 10,000 stores. Today in China, we have 3,035 stores, but also an unprecedented opportunity to serve a burgeoning middle class that is estimated to grow to more than 600 million people,” Schultz said in a company-wide email seen by Yahoo Finance. “Kevin [Johnson], Belinda [Wong] and I believe that, compared to the U.S., we will more quickly achieve 10,000 stores in China. We also predict that China will one day have twice as many stores than the U.S. Already we are opening a new store here every 15 hours and have exceptionally strong comps.”
This week, Starbucks unveiled its largest store ever, a 30,000 square-Starbucks Reserve Roastery in Shanghai the company bills as a “fully immersive coffee wonderland.” The new roastery offers three coffee bars, including one that’s the world’s largest coffee bar that extends 88 feet. The new location also showcases an augmented reality experience and other digital features.
The roastery signals Starbucks’ big bet on Chinese consumers, who have traditionally opted for tea.
The initial response appears to be promising. In the 48 hours before it debuted to the public, Starbucks saw more than $1 million in online sales for the Shanghai Roastery’s coffee and merchandise on Alibaba’s (BABA) Tmall. Customers lined up for a two-and-a-half hour wait to enter the store on opening day.
Challenges in the U.S.
Going forward, China will continue to play a critical role in the growth of Starbucks, Schultz wrote. Meanwhile, there are “short-term challenges” the company is facing in the U.S.
“This last year, we saw a slowdown in our comp store sales, which was mostly a reflection of the afternoon day part, considering that our morning peak is as strong and as healthy as ever,” Schultz said. “The issue is not the result of competition or erosion in the relevancy of the Starbucks brand. Far from it. In fact, our new stores continue to outperform the class of stores opened in the previous year.”
In its effort to address in-store traffic issues, the company has been working on improving mobile and digital capabilities among other things.
“Rest assured, we understand the challenges and are confident that we have the innovation, operational expertise, and resources to overcome them,” he said.
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.
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