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Starbucks partners with Alibaba to deliver coffee in China

Starbucks (SBUX) is making a major push to reach millions of Chinese consumers whether at home or work by partnering with e-commerce giant Alibaba (BABA). 

Beginning next month, Starbucks will debut delivery services in 150 stores in Beijing and Shanghai using Alibaba’s on-demand food delivery platform Ele.me, the two companies announced.

Alibaba’s Ele.me platform hosts 3 million registered riders who primarily deliver food orders, but have also broadened services to include medicine, groceries, and flowers. The fleet has been customized to carry Starbucks’ beverages. After piloting in Beijing and Shanghai, the plan is to then expand the delivery program to more than 2,000 stores in 30 cities across China.

The announcement comes a week after Starbucks reported its third-quarter earnings, noting underperformance in China as it continues its growth phase there. On the earnings call, Starbucks CEO Kevin Johnson acknowledged “the need to move faster and enable delivery in China.”

Also on that call, Starbucks China CEO Belinda Wong pointed out that some upstart competitors have moved into the coffee space offering lower prices and delivery. That said, she believes Starbucks will prevail in delivery.

“While recent coffee market entrants have chosen to capitalize on delivery combined with heavily discounted offers, there’s significant compromises at play in terms of quality, experience, and business sustainability,” Starbucks China CEO Belinda Wong said at the time. “These will prove to be short-lived. Let me assure you that our new delivery service will adhere to the high standards our customers in China have come to expect with regard to the Starbucks experience.”

Starbucks will enter Alibaba’s Hema supermarkets

In addition to the Ele.me delivery service, Starbucks will enter Alibaba’s Hema supermarkets, whose stores are known for its digitized grocery shopping experience. Within select Hema stores in Hangzhou and Shanghai will be “Starbucks Delivery Kitchens,” a back-of-the-house operation where trained baristas will fulfill online Starbucks delivery orders.

Starbucks’ partnership with Alibaba goes beyond the delivery service. Starbucks and Alibaba will launch a virtual Starbucks store by integrating both companies customer-facing mobile platforms, including My Starbucks Rewards, Taobao, Alipay, Tmall, and Koubei. Within the ecosystem of apps, shoppers will be able to order a Starbucks beverage or send one to a friend using the company’s “Say it with Starbucks” social gifting platform or buy merchandise.

“Our transformational partnership with Alibaba will reshape modern retail, and represents a significant milestone in our efforts to exceed the expectations of Chinese consumers. Starbucks China is one to watch, and I have full confidence in the team that will bring the new innovation behind the Starbucks Experience to life,” CEO Kevin Johnson said in a statement.

More than 500 million Chinese consumers shop on Alibaba’s platforms. They’re frequent users of the apps too. Taobao, an online marketplace, is opened an average of 7.8 times per day.

With coffee consumption on the rise in China, Starbucks sees the opportunity for growth in a market that has traditionally opted for tea.

Starbucks first entered China in 1999. This year, the company plans to open 600 new stores in China, with a goal of operating 6,000 stores in 230 cities in China by the end of fiscal 2022.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter. Send tips to laroche@oath.com.