Starbucks’ Major Investment in China: A New Era of Coffee Supply Chain Localization

Starbucks’ Major Investment in China: A New Era of Coffee Supply Chain Localization

Massive Starbucks Investment in Kunshan, China

Starbucks, the global giant in the coffee industry, has made a groundbreaking investment in mainland China by completing the construction of its Coffee Innovation Industrial Park, referred to as the “Industrial Park,” in Kunshan, Jiangsu. The investment totals 1.5 billion RMB, which equates to approximately USD 220 million, making it the largest investment Starbucks has ever made for a coffee production and logistics base. This new development aims to achieve full localization of the coffee supply chain in the country, demonstrating the importance of the Chinese market in Starbucks’ global strategy.

China’s Coffee Consumption Potential

Laxman Narasimhan, the Global CEO of Starbucks, emphasized the growth opportunities in China, a market he considers critical for Starbucks. He supported his point using data, which showed that the average annual coffee consumption per capita in China is about 12 cups, compared to 200 cups in Japan and 380 cups in the United States. This indicates that the coffee market in China is still in its early stages and presents an opportunity for Starbucks to further penetrate the market. The establishment of this vertical supply chain in China is expected to provide the impetus for Starbucks’ further growth in the country.

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Starbucks’ Expansion Plan in China

Despite already having nearly 1,100 stores in Shanghai, Starbucks still sees the potential for further expansion in the city. On November 14th, Starbucks revealed its strategic vision for China in 2025 at a global investor conference. The ambitious plan includes opening a new store every nine hours over the next three years, resulting in an additional 3,000 new stores covering 300 cities in China. By 2025, the total number of Starbucks stores in China is projected to reach 9,000, and the company plans to add 35,000 new employees, bringing the total to over 95,000.

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Localizing Coffee Supply Chain

Starbucks’ investment in the Coffee Innovation Industrial Park is a significant step towards localizing the coffee supply chain in China. The park will serve as a key component of Starbucks’ global roasting network, sourcing coffee from China and around the world directly from the origin for processing, roasting, packaging, and distribution. This new roasting facility will be designed with the intent to apply for U.S Green Building Council LEED Platinum certification as well as China’s Three Star Green Building standards, reflecting Starbucks’ commitment to sustainability.

Investing in Sustainable Coffee Manufacturing

Starbucks’ new facility will incorporate advancements in sustainable manufacturing, smart supply chain innovation, and technology to deliver the most energy and water-efficient roasting operations for Starbucks in the world, while minimizing waste. This bold infrastructure investment is a testament to Starbucks’ multi-decade commitment to strengthen the specialty coffee industry in China, and it is expected to lay a strong foundation for continued business growth and development in the country.

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Conclusion

Starbucks’ investment in the Coffee Innovation Industrial Park in Kunshan, China, marks a significant milestone in the coffee industry. The localization of the coffee supply chain, coupled with the potential growth of the coffee market in China, positions Starbucks for accelerated expansion in the region. With its commitment to sustainability and technological advancements, Starbucks is poised to shape the future of the coffee industry in China and beyond.