Starbucks to Boost China Investment

July 16 -- Starbucks Corp., the world's largest coffee-shop chain, will expand in China after announcing plans to close underperforming U.S. stores and slash jobs.

The chain's changes will affect Starbucks' China operations ``more positively,'' the Seattle-based company's Greater China President Wang Jinlong said in an interview today in Hong Kong. ``There will be more innovation, more new products, more resources, not only investment.''

U.S. consumers are spending less on so-called affordable luxuries like gourmet coffee as they face a contracting economy and record gasoline prices, forcing Starbucks's biggest closures and job cuts in its history, announced on July 2. The company will close 600 U.S. outlets and eliminate 12,000 jobs, slowing its domestic expansion after doubling in size in four years.

Starbucks will instead turn to China, Canada, the U.K. and Japan for growth.

Starbucks expects to gain as more-affluent Chinese are drawn to gourmet coffee. There are now 100 million middle-class consumers in China and this may grow to 200 million by 2020, Wang said today at the Retail Asia Congress in Hong Kong. Retail sales in China gained 21.6 percent in May, close to the fastest pace in nine years.

China, where more people drink tea than coffee, ``has the potential to become the largest market outside the U.S.'' for Starbucks because of the nation is the world's largest with a population of 1.3 billion people, Wang said.

Starbucks has more than 300 stores in China and had set plans to open at least 80 outlets this year.

``We still have a long way to go,'' Wang said. ``We'll continue to expand. The number of stores will not be in the hundreds, but in the thousands.''

The company plans to expand in cities including Beijing and Shanghai, as well as smaller cities including Wuhan in the country's eastern and western regions.


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