Starbucks Opens Its Production Base in China

Credit: Visual China

BEIJING, September 25 (TiPost) – Starbucks has completed the construction of China Coffee Innovation Park in Kunshan, Jiangsu province and put it into operation, marking the first time for the world’s largest coffee company to have the scaled vertical integration 'from bean-to-cup' across one market.

TiPost App has learned that during the construction of the innovation park, two additional rounds of investment were made. The total investment amounted to 1.5 billion yuan (approximately 220 million USD), making it the largest investment by Starbucks in China to create a coffee production and logistics base, and it will also be the company’s most environmentally friendly and energy-saving production base globally.

Currently, Starbucks has more than 6,500 stores in China across over 250 cities. By building the park in Kunshan, Starbucks is establishing a complete industry chain, roasting high-quality Arabica coffee beans from more than 30 countries and regions including China, to meet the growing coffee demand of its Chinese stores, and further expand its presence in the Chinese market.

Localization of the Entire Coffee Supply Chain

“As one of the largest consumer markets in the world, China presents tremendous opportunities for Starbucks. The Coffee Innovation Park highlights Starbucks foresight in elevating the supply chain through digitalization and advancing our sustainability agenda, enhancing our unique competitive advantage as we accelerate our global growth,” said Laxman Narasimhan, the CEO of Starbucks Coffee Company. "I couldn’t be prouder of the China team’s visionary thinking. As Starbucks largest and fastest-growing international market, we will continue to deepen our investment and reinforce our unwavering long-term commitment to the China market," he said.

During the launch on Tuesday, Starbucks China Chairperson and CEO Belinda Wong said, "The Coffee Innovation Park holds important significance for Starbucks in China and globally. It not only showcases Starbucks unrivalled coffee leadership, fulfilling our scaled vertical integration in China ‘from bean-to-cup’, but also sets a new benchmark for sustainability in China’s coffee industry."

The innovation park built by Starbucks China covers a total area of approximately 80,000 square meters, with three main components: a coffee roasting factory, an integrated logistics center, and a coffee experience center. The functions include coffee bean import, roasting, packaging, storage, logistics, as well as coffee-themed tours and related training.

Among them, the integrated logistics center in the innovation park is equipped with a 34-meter-high three-dimensional warehousing system, which automates the handling of over 90% of goods, efficiently managing inventory, tracking, and operations. The space utilization rate is six times higher than that of Starbucks' traditional warehouses, making it the company's most advanced logistics distribution system in terms of automation.

TiPost App learned that the launch of this innovation park is the first time that Starbucks has fulfilled its scaled vertical integration 'from bean-to-cup' across one market and completed the localization of the entire coffee industry chain. The concept of sustainability is also integrated into all aspects of the design, construction, and operation of the Innovation Park. For example, the park is equipped with over 26,000 square meters of solar panels, providing 20% of the energy, and is expected to achieve a maximum of 90% waste recycling each year.

After the base is officially put into operation, it will roast high-quality Arabica coffee beans from over 30 countries and regions, including China, to supply over 6,000 Starbucks standard stores in China. This also means that the coffee beans used in Chinese Starbucks stores will be 100% roasted in China.

Balanced Development in Both Big and Small Cities

Starbucks entered China in 1999. In 2012, it established the Coffee Farmer Support Center in Yunnan, providing local farmers with agricultural skills training and resources. In October 2014, Starbucks Reserve brand entered China. In December 2017, Starbucks Reserve Shanghai Roastery opened.

On September 14, 2022, Starbucks stated in its 2025 China Market Strategic Vision that it planned to open 3,000 new stores in China at an average rate of one store every 9 hours over the next three years.

Starbucks continues to invest in China and remains confident in the Chinese market. Last month, it announced the establishment of the Starbucks China Innovation and Technology Center (SITC) in Shenzhen, with an initial investment of approximately 1.5 billion yuan over the next three years. The center will serve as Starbucks' first dedicated digital technology innovation center in China, further driving the digitization process of its stores and multiple channels. The center will be located in Futian District and is expected to start operations in September this year.

When it comes to the Chinese market, Narasimhan said that data shows 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. In comparison, the coffee market in China is still in its early stages. Although Starbucks already has a presence in 250 cities in China, there is still room for further expansion. Narasimhan said, "The establishment of a vertical industry chain will provide the engine and fuel for Starbucks' further growth in China."

Starbucks is also expanding its presence in third- and fourth-tier small cities. Regarding store growth in the Chinese market, Wong said that Starbucks has always adopted a balanced strategy, focusing on both first- and second-tier cities.

"Typically, 60% of our new store openings in a year are in first- and second-tier cities, which are our top 20 cities, while 40% are in lower-tier cities. Currently, Starbucks has stores in 250 cities nationwide and has entered 800 county-level markets in China. It is worth noting that stores in county-level markets usually perform better than new stores in the top 20 cities," she said.

Starbucks has publicly expressed its optimism about county-level markets more than once. Last year, Starbucks China's Chief Operating Officer Liu Wenjuan said, "When it comes to expanding in the coffee market, Starbucks values not only the more than 300 prefecture-level markets but also nearly 3,000 county-level markets."

In addition, localizing the leadership team is a major focus for Starbucks China. In October last year, Starbucks China announced that Wong, who led Starbucks' large-scale expansion in the Chinese market, would once again serve as CEO of Starbucks China. She has been with Starbucks for 24 years. Liu, who was recently promoted to Executive Vice President and Co-CEO of Starbucks China, joined the company 11 years ago.

Currently, Starbucks China has 60,000 partners and has selected 20 local coffee roasters from among them. After receiving over 600 hours of training, they form a team of coffee roasters, including the only female master roaster in Starbucks globally.

Wong stated that Starbucks China's next goal is to cultivate a new generation of leaders, including the Starbucks China management team, store partners, and regional management.

(This article was first published on the TiPost App, Author | Liu Dafang, Editor | Fang Yu)