Apr 10, 2010

Chinese news reports about Starbucks selling tea in China

My father showed me a series of news reports from China about Starbucks starting to sell tea in China. I thought they are interesting to share. These interviews are from TV and newspapers. Since I can't memorize exact words, I paraphrase most of them. Light colored texts are my comments.

Interview with a Starbucks manager -

Reporter: What makes Starbucks start selling tea?
Manager: (talking about market, culture, bla bla bla...) In major cities of China, Starbucks is still the largest coffee chain store, but there is more and more competition from European and Southeastern Asian coffee chain stores. 
Manager: Some of our customers enjoy our cafe environment more than enjoying coffee (that's funny and true). Therefore including more Chinese elements in our products attract more consumers.

Reporter: How confident are you about Starbucks selling tea to Chinese?
Manager: Well, I am more cautious about selling tea than selling coffee. Most Chinese are not picky about coffee (That's very true, and it's funny that Starbucks coffee still sells well in China for about $3.7 per cup, which is the price of a decent restaurant meal in China.) but people are surely pickier about tea. So far sales records are excellent. Currently tea is 15%-20% of our sales. (I am impressed by the power of Starbucks! Starbucks tea is about $2.8 - $3.4 per small cup, still price of a decent restaurant meal in China! I am impressed that Chinese are still willing to pay this price for Starbucks tea while they can get tea all over the city in much lower prices.)

Interview with consumers -

Reporter: What's your comment about Starbucks selling tea?
Consumer 1: It's nice that Starbucks tries to include Chinese elements. That's a good thing! Well, it's good, as long as they don't get too Chinese. (I guess he made a point. Who would pay for $3.4 a cup if it's totally Chinese AND it's in China!)

Consumer 2: I guess it will attract some older people to Starbucks. I am not interested. Starbucks coffee sounds cool. Starbucks tea sounds odd. (I read this from paper, but guess it must be a young guy.)

Consumer 3: I am sure the tea they sell is foreigners' tea. Nothing like what I would drink daily. Why would one go to Starbucks for tea? (This one sounds like my mother. She always call teabags "tea for foreigners". Although I haven't tasted it, and may not want to spend $3 to taste it, I do think the starbucks tea looks and sounds better than teabags.)

Consumer 4: In my opinion, what you drink in a cafe is not important. What's important to me is the relaxing environment of a cafe. (In China, most cafe chain stores like Starbucks are expensive and considered "decent".) Then of course it's great when there are more choices and tea options. (I believe what he says represents opinions of many business consumers. In China, many business conversations carry out in restaurants and cafes like Starbucks. Going to Starbucks is an expenditure standard for some businessmen. Then for those who don't really enjoy coffee, tea options are good news.)

Interview with teahouse owner -

Reporter: Will Starbucks selling tea cause impacts on business of local teahouses? (To be honest, when I lived in Beijing, I never really cared about "local teahouses". Most of them are simply too expensive for ordinary people. A pot of tea often costs you many decent restaurant meals.)

Teahouse owner: I believe it's good influence. Young people like Starbucks more than traditional teahouses. If Starbucks gets more young people interested in tea, it's good news to all of us. After all, when people know more about tea, they will seek for more tea and tea of higher quality. Then they can possibly become our customers. (That's a good point. Or people buy loose leaf tea and make tea at home.)


AmazonV said...

It's a fairly well documented phenomenon with coffee - starbucks boosts local coffee house business as people get excited about the product and want to branch out. I assume it will hold true for tea as well.

Alex Zorach said...

I want to be cautious about what I say because I haven't been to China, but I've heard from others who have visited China that American chains in China tend to be visited more as a status symbol than they are for the quality of their food and drink. This seems to fit with your remarks here about the price of a cup of tea in starbucks being comparable to a decent restaurant meal. (Heck, this isn't limited to China--in Cleveland Ohio, you can get a decent lunch in some of the cheaper restaurants for $3.70)

Amazonv's comments are insightful...but...aren't the Chinese already interested in tea? I just can't imagine an American mass-marketing retailer that specializes in coffee, not tea, getting people in China more interested in tea. All the Chinese tea drinkers who have come over here as exchange students have remarked to me that it's hard to find even decent tea in the U.S.

I think the effect starbucks would have on culture and on the marketplace is going to be VASTLY different in China than it is in the U.S. I don't know enough to say what that effect will be but I can't see it playing much of a role in terms of boosting interest in high-quality loose-leaf tea.

Gingko said...

Many thanks to both of you for the thoughtful inputs! Yeah there is so many facets to consider in this issue! Wow, maybe we can already have a small blog carnival about coffee/tea/mass market/specialty products/chain store/boutique retailer... :-D

I myself start coffee drinking from Starbucks - they are really good at marketing and providing a decent environment, especially in China. And later I ended up buying beans from Trader Joe's and make coffee at home, cheaper and more catered to my particular tastes. In this sense, I agree with AmazonV that Starbucks (and some other big sellers) sometimes has the power to seduce people into a new beverage world, which may possibly happen to tea too.

On the other hand, I agree with Alex that $3.7 a cup is not quite fair, and what I particularly don't like about Starbucks and other big sellers is, they may (I believe intentionally but not openly) give people an illusion that expensive=decent quality

In the western world, whether or not going to Starbucks, people are more familiar with coffee and can judge it in a more objective way. But in China, I believe many patrons choose Starbucks just for its price (yeah some people LOVE high price).

It's very possible that Starbucks may make big money on tea though. There is about 15 million people just in Beijing, not including tourists. 99% of them may not go to Starbucks or can't afford it at all, but if Starbucks can convert 1% of them, it's already big number.

Then another phenomenon in China is, many teenagers keep buying things above their family income and their parents pamper them into it (this largely contributed to McDonald's success in China). They are also ready to become Starbuck's tea customers. This in one aspect is really bad. But in the other aspect, as a positive outcome, maybe Starbucks can really seduce them into the tea world.