Starbucks cements dominance in China with Alibaba delivery partnership

Reuters

• Starbucks has agreed a new delivery partnership with
  Alibaba, one of China’s largest online retailers.
• Starbucks already controls 80% of China’s coffee
  market, and this will help it get even more.
• The new deal will see Starbucks integrate a “virtual
  store” in online shopping and payment apps.
• It comes after Starbucks’ same-store sales in China
  slipped 2% in the past quarter amid fierce competition new
  regulation.
• People in China have been consuming more and more
  coffee in recent years.

Starbucks is cementing its dominant status as China’s largest
coffee provider with a new delivery partnership with Alibaba, one
of the country’s most prominent online retailers.

The Seattle-based company has signed a new deal with Alibaba, the
e-commerce giant owned by Jack Ma, to expand its delivery
services throughout China,
CNBC reported on Thursday.

Starbucks already controls some 80% of the Chinese coffee market,
and the tie-up will open even more opportunity for them.

The new deal will see Starbucks integrate a “virtual store” to
Alibaba’s online shopping and payment apps — such as Alipay,
Taobao, Tmall, and Hema. That would allow users to order from
Starbucks on their phones, and have their drinks and food
delivered to them in person.

“That opens up 500 million or more active users of those apps
that will have access to Starbucks,” Starbucks CEO Kevin Johnson
told CNBC.

Partnering with Alibaba also allows Starbucks to work with
Ele.me, an Alibaba-owned online food delivery service, to open
150 stores in Shanghai and Beijing, and broaden delivery to 2,000
stories in 30 cities around China by the end of 2018.

The coffee giant also plans to build up to 600 “Starbucks
Delivery Kitchens” in Hema, a
futuristic, brick-and-mortar supermarket chain also owned by
Alibaba.

Starbucks plans to build
“Starbucks Delivery Kitchens” in this supermarket
chain.
Alibaba

The new partnership comes after Starbucks’ same-store sales in
China
slipped 2% in the past quarter amid fierce competition and
tightened regulations on delivery services.

Starbucks already controls 80% of China’s coffee
market, the
Financial Times reported, citing Euromonitor
statistics. It generated $3.24 billion in yearly revenue
from China and the Asia-Pacific region last year — 15% of its
global total.

China, traditionally a tea-drinking country, is starting to
consume more and more coffee. Euromonitor, the market research
consultancy, reported
a dramatic rise in demand for freshly-brewed coffee in the
country from 2017.

Last December, Starbucks also opened
a 30,000-square-foot, two-story store in Shanghai, where
visitors can watch their coffee being roasted from start to
finish. It is the largest Starbucks in the world.