Chapter 9

A Lifestyle in the Third Place:

Starbucks’ China Journey

On September 14, 2022, Starbucks unveiled its China Strategic Vision 2025 during a
global investor conference. The Seattle-based coffee giant shared its plans to expand
its coffee shops in China from 6,000 to 9,000, increase its employees, referred to
as “partners”, from 60,000 to over 95,000, double its net income, and increase its
operating profit by four times. What this translated is to open a new Starbucks store
in China every nine hours on average over the next three years. Additionally, Star-
bucks plans to enter 550,000 supermarkets and convenience stores with its ready-
to-drink coffee, marking its most ambitious growth plan in a single regional market
outside North America since its establishment in 1971.1 Despite challenges such as
the COVID-19 pandemic, intensified competition from new coffee brands in China,
and the increasing popularity of tea consumption among younger consumers, Star-
bucks’ plan reflects its confidence in the mainland China market and its future growth
potential.
Starbucks entered mainland China in 1999 with the opening of its first coffee shop
in the China World Trade Center office building in Beijing. Over the years, China
has become Starbucks’ fastest-growing overseas market, with the largest number
of coffee shops outside the United States spread across more than 240 cities. The
accomplishment of Starbucks in transforming itself from a latecomer foreign brand
to a dominant player in China’s coffee market is a captivating subject, in particular,
it would be intriguing to explore how the brand cultivated an emotional connection
with its consumers through coffee and beyond. This chapter will delve into this
remarkable story and uncover the secrets behind Starbucks’ success in China.

1 https://www.starbucks.com.cn/about/news/starbucks-strategic-vision/.
© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 165
J. G. Wang et al., Yes Logo, https://doi.org/10.1007/978-981-99-6608-0_9
166 9 A Lifestyle in the Third Place: Starbucks’ China Journey

9.1 A New Dish on the Menu

Prior to 1978 when China announced its new policy on economic reform and opening
up to the outside world, the coffee market in China was virtually non-existent. The
first foreign coffee brands to enter the Chinese market were Maxwell and Nestle in the
1980s, with their instant coffee products.2 Many aging consumers may still remember
their advertisements from that time, in which these coffee makers attempted to
educate Chinese consumers on how to brew coffee. Nestle’s slogan “Nestle, it tastes
great” and Maxwell’s “Good to the last drop”3 were well-known among consumers,
and their coffee products became popular gifts for families and friends. However,
during that time, Chinese consumers were still not accustomed to drinking black
coffee without milk and sugar, which was popular in Europe and the United States.
To tackle this issue, Nestle introduced a 1 + 2 blended coffee that removed the bitter-
ness and added creamer to create a sweeter taste. This innovative approach helped
to popularize coffee among Chinese consumers, eventually making it a part of their
daily diet.
Coffee shops started to emerge in mainland China during the 1990s. In 1994,
McDonald’s introduced “freshly brewed coffee” in its restaurant on Huaihai Road,
Shanghai. The standard serving size was a large cup of coffee with two milk balls,
but many consumers still found the taste too bitter and added five milk balls to reduce
the bitterness.4 Nevertheless, Shanghai’s well-known preference and tolerance for
novelty quickly made “freshly brewed coffee” popular in China’s largest city.
During the mid-1990s, Taiwanese freshly ground cafes, including “Carving Time”
and “Ueshima Coffee,” ventured into the mainland China coffee market. Zhuang
Songlie, a college student from Taiwan who studied in Beijing, opened a café named
“Carving Time” with his girlfriend near Peking University (PKU) and Tsinghua
University in 1997, using money from his family. Initially, the café had only a few
customers, so in order to attract students and faculties from PKU and Tsinghua
University to the shop, they started screening movies to create a “literary atmosphere”
in the coffee store. In the same year, Ueshima Cafe opened its first store in Hainan
Province, followed by Manabe Coffee, which opened its shop in Huating Road,
Shanghai in 1999. In 2001, Ueshima Cafe entered Shanghai and quickly gained
popularity with its “coffee + Western food” menu. During the early days of coffee

2 Nestle opened its first sales office in Shanghai in 1908, but stopped its operation in mainland
China for decades before China’s economic reform and reopening in 1980s. Maxwell entered to
mainland China in 1984. https://www.nestle.com.cn/about_nestle/nestle_in_china; https://zhidao.
baidu.com/question/2125615209378050187.html?fr=search&word=%C2%F3%CB%B9%CD%
FE%B6%FB%BF%A7%B7%C8%BA%CE%CA%B1%BD%F8%C8%EB%D6%D0%B9%FA%
3F&ie=gbk.
3 https://tv.sohu.com/v/dXMvMzM4OTE2MjM4LzE4Njg5MjkwMi5zaHRtbA==.html;

https://en.wikipedia.org/wiki/Maxwell_House#:~:text=In%201915%2C%20Cheek-Neal%20b
egan%20using%20a%20%22Good%20to,Foods%20which%20took%20over%20the%20Maxw
ell%20House%20brand.
4 https://www.shkp.org.cn/articles/2021/12/wx359951.html.
9.1 A New Dish on the Menu 167

shops in China, the customer base primarily comprised two categories: business
professionals who came for business meetings and romantic college students.5
In the late 1990s, Starbucks made its entry into the mainland China market and
introduced espresso, which significantly changed the taste preferences of Chinese
consumers. David Sun, a Taiwanese man known as the “Father of McDonald’s” in
Taiwan for introducing the fast-food chain there, was generally viewed as the person
who brought Starbucks to mainland China. In 1998, when he visited Starbucks head-
quarters in Seattle, only two employees were working in its International Division,
a general manager and a deputy general manager who were developing Starbucks’
global strategic plan. Sun suggested and convinced them to expand Starbucks into
mainland China, and obtained the authorization to represent Starbucks in northern
China.6 At the same time, the Unipresident Group in Taiwan and the Maxim Group
in Hong Kong were also authorized to represent Starbucks in the Greater Shanghai
Area and Southern China, respectively.
In 1999, the first Starbucks store opened in the China World Trade Center, offering
a cup of cappuccino for RMB 19 yuan, while the real estate price in Beijing at that time
was only RMB 3,000 per square meter.7 To ensure authenticity, Starbucks initially
imported all the items used to make coffee for its earliest stores, even though it later
began sourcing consumables like cups from local suppliers in China. In these early
stores, Starbucks utilized fully automated coffee machines from Italy that operated at
high pressure and temperature, taking only 18–23 seconds to brew a cup of espresso
and then deliver it to customers.
In May 2000, Starbucks opened its first store in Shanghai, and CEO Howard
Schultz attended the ribbon-cutting ceremony. Dressed in a black suit and standing
alongside baristas in green aprons, he shared with Chinese consumers the story of
Starbucks’ “Third Place,” where people are free, equal, and can truly relax and be
themselves. At that time, the average monthly salary of Shanghai residents was
RMB 1,842 yuan, and a cup of latte was sold for RMB 19 yuan.8 However, Shanghai
consumers were far more receptive than expected, and many stores in Shanghai
became profitable in just 21 months after opening, which was the first time in
Starbucks’ global history.
Compared to the many small cafes in the market at the time, Starbucks created a
completely new “social space” and lifestyle with distinct “standard” elements, such
as high income, elegant taste, and international fashion. As China’s economy grew
and the white-collar class expanded, Starbucks’ coffee culture became increasingly
popular. After 2005, Starbucks increased its investment in China and took back its
licensed operations in the Chinese market to run it directly. In addition, the company
accelerated the opening of new stores in wider geographic areas, including second
and third-tier cities.

5 https://www.vzkoo.com/read/20220617c4be58964c416e1a1b06638d.html.
6 http://www.360doc.com/content/14/0806/11/13141673_399792968.shtml.
7 https://www.163.com/dy/article/E4EANEKF05228OH7.html.
8 https://zhidao.baidu.com/question/499265089417776812.html.
168 9 A Lifestyle in the Third Place: Starbucks’ China Journey

In 2011, Starbucks expanded its presence in China, reaching over 400 stores,
which further grew to more than 4,000 by 2019. In April 2021, Starbucks opened
its 5,000th store in mainland China, in Qingdao, known as China’s beer capital. On
September 27, 2022, Starbucks celebrated the grand opening of its 1,000th store in
Shanghai, marking a total of 6,000 stores in China, and Shanghai becomes the city
with the most Starbucks locations worldwide.9

9.2 A Drive Fueled by Continuous Creativity

Looking back at Starbucks’ journey in mainland China, it is evident that contin-

uous creativity has been a driving force behind its rapid growth. This aligns well
with Starbucks’ innovative tradition in the coffee industry, as exemplified by the
introduction of the Americano and latte with added water and milk, as well as the
launch of the classic “Frappuccino” in 1995. These Starbucks heritages have been
well embraced in China and are widely recognized as key factors contributing to
Starbucks’ remarkable success in the country, which is fully reflected in the various
“firsts” that Starbucks has brought to its Chinese consumers.
Let’s start with Starbucks Reserve, which was launched in China in 2014. Every
year, Starbucks’ coffee buyers travel to coffee bean belts around the world in search of
high-quality Arabica coffee beans. Only a small number of coffee beans possessing
extraordinary quality, unique flavor, and a story behind them are selected for the
Starbucks Reserve coffee. The selected beans are presented in a designated semi-open
brewing bar in the store, where customers can interact with coffee masters, learn about
the history and flavors of the selected coffees, and acquire knowledge about various
brewing methods. Customers can also experience the “chemical reactions” between
different brewing methods and different coffee beans, and distinguish different flavors
such as “citrus, caramel, and herbal” as described on the coffee bean cards. This
initiative has been well-received by customers, as it allows them to have a more
immersive coffee experience and learn about the stories behind their cups of coffee.
An example of Starbucks Reserve coffee in China is the use of yellow honey to
process coffee beans by Starbucks in Yunnan Province in 2017. Traditionally, farmers
in the region treated green coffee beans with water, but this time they took a different
approach using yellow honey to process. This more complex treatment requires
farmers to possess more processing knowledge and make additional efforts, such
as accurately determining the proportion of removed pectin and striking a balance
between drying and fermentation. Nonetheless, this unique approach distinguishes
Starbucks from others.
In 2015, Starbucks introduced a new coffee category in China called Flat White,
which originated from the Australian-born espresso classic. Flat White differs from
regular Latte coffee as it uses two Ristretto Shots, which are extracted using the
same grinding and powdered coffee, but with less water, resulting in a more intense

9 https://stories.starbucks.com/press/2022/starbucks-opens-its-6000th-store-in-china/.
9.2 A Drive Fueled by Continuous Creativity 169

flavor. Flat White also has a subtle sweetness, which balances the initial bitterness.
Upon its launch, Flat White quickly gained popularity among Starbucks fans, who
replaced their “Daily Latte” with “Daily Flat White”, making it a popular choice in
cafes across the country.
In the summer of 2016, Starbucks brought a new coffee experience to China with
the launch of “Cold Brew Coffee,” which transformed the way coffee was brewed.
Unlike the traditional method of using hot water, cold water is used to brew the
coffee in this unique process. To make this coffee, Starbucks uses a specially blended
cold-brew coffee bean that is ground and extracted with cold filtered water for over
10 hours. The slow extraction process reduces the coffee’s acidity and allows flavors
to develop over time, resulting in a smooth and sweet-tasting cup of cold brew coffee.
This innovative brewing method has since gained popularity worldwide and is now
available in many coffee shops globally.
In November 2016, Starbucks introduced a modified version of its cold brew
coffee in China called Starbucks Nitro Cold Brew™ Coffee. This new coffee is
made by injecting food-grade nitrogen into the low-temperature and slow-extracted
cold-brew coffee. The result is a coffee with dense foam and a more natural and
sweet taste. The nitrogen infusion gives the coffee a creamy texture and enhances
the sweetness, making it a popular choice for coffee lovers.
In August 2016, Starbucks launched its premium tea brand, Teavana, in China,
offering two new Teavana Iced Shaken Teas specially developed for Chinese
consumers: Iced Shaken Peach Green Tea or Oolong Tea, and Iced Shaken Pomelo
Honey Black Tea. To develop these products, the Starbucks team of “Tea Doctors”
carefully selected black tea, green tea, and oolong tea as the tea base, and added
various fruits that are popular among Chinese consumers. Through countless
taste tests and experiments, they successfully created teas that provided Chinese
consumers with a unique and surprising experience, blending the bold flavors of tea
and fruit in familiar and enjoyable ways.
In 2017, Starbucks introduced Princi in China, a leading Italian artisanal bakery
and gastronomic brand, to provide food for its new Reserve Roastery and Starbucks
Reserve Bakery Café in Shanghai. This marked a significant change from the previous
Starbucks model, which did not include in-store baking of food. With Princi’s exper-
tise, Starbucks was able to offer its customers freshly baked Italian bread, pizzas,
and other gourmet food items, further enhancing the overall coffee experience.
In the same year, Starbucks Reserve Roastery Shanghai opened Bar Mixato, which
was led by Timothee Becqueriaux, a cocktail master who had won the title of 2019
China regional champion in the Chivas Cocktail Competition, the world’s top cocktail
competition. When the Bar Mixato launched, globally debuting unique cocktails
using Reserve Coffee and Teavana as the base, Timothee and his team of over 20
bartenders with extensive knowledge of coffee, tea, and wine worked tirelessly to
provide customers with a unique and delightful experience at Bar Mixato.
Another “first” came in April 2020, when Starbucks announced the launch of the
“Starbucks GOOD GOOD movement” in China, in partnership with global plant-
based dietary advocates Beyond Meat and OATLY. This initiative aimed to provide
170 9 A Lifestyle in the Third Place: Starbucks’ China Journey

Chinese consumers with new plant-based food and beverage options, including rolls
with plant-based beef, as well as beverages made with plant-based oat milk.
In April 2020, Starbucks Reserve Roastery Shanghai also introduced a new coffee
platform called the “Starbucks Reserve Whisky Barrel-Aged Coffee” series, which
combined the flavors of coffee and whisky. This unique Starbucks Reserve coffee
uses Guatemalan coffee beans brewed in whiskey barrels, resulting in a balance
of whiskey aroma and coffee flavor. The entire process—from barrel selection and
coffee bean filling to barrel changing and roasting—was completed in Seattle. The
resulting cold-brew coffee offered drinkers the rich aroma of alcohol without any
actual alcohol content.
In July 2020, Starbucks introduced the Tea Cloud Oolong series, which featured
three unique tea drinks that broke traditional boundaries: dragon fruit guava tea
cloud oolong, passion fruit peach tea cloud oolong, and rose grape tea cloud oolong.
The Starbucks China team developed this series of tea drinks, which introduced
an innovative way of tea-making in the industry. Fresh tea soup was used to make
“cloud” tea, which was created by stirring the tea more than one thousand times to
achieve a unique texture and flavor.
In June 2022, Starbucks introduced a new iced coffee category called the “Iced
Shaken Espresso” series, which showcased a new coffee blending technique called
“Ice Shake.” The “Shake” method, commonly used in cocktail preparations, was
applied to coffee preparation. Freshly brewed espresso typically has a strong flavor,
but within a few seconds, the flavor and aroma could quickly dissipate. To prevent
this, the ice shake technique takes advantage of the cold ice. The barista needs to pour
the freshly extracted espresso directly onto the ice within 10 seconds, utilizing the
low temperature of ice to lock in the fleeting rich aroma, then “shakes” to thoroughly
mix the espresso, ice cubes, and flavored syrup.
Over the years, Starbucks has constantly developed and produced new coffee
categories and innovative products, solidifying its position as an indisputable leader
in the coffee market in China since its entry in 1999. These supply-side-oriented
innovations are the result of decades of knowledge and experience in coffee making,
as well as a deep understanding of consumers’ beverage consumption needs, whether
physical and explicitly expressed, or potential and emotional, which has provided
Starbucks with limitless expansion opportunities and possibilities in the marketplace.

9.3 Starbucks’ “Third Place” Concept

Let’s delve into Starbucks’ concept of the “Third Place” now. While coffee primarily
serves as a functional beverage, the places where customers can consume it, such as
coffee shops, offer potential for additional functions beyond its physical properties,
such as socializing. Unlike noisy bars that may only attract a specific type of customer,
coffee houses offer a quieter and more relaxing environment that is enjoyable for
socializing over a cup of coffee.
9.3 Starbucks’ “Third Place” Concept 171

Fig. 9.1 Starbucks’ “Third Place” fosters a lifestyle for its consumers. Source Yuming Ren/China
Business Network Ltd., Shanghai

Starbucks has effectively harnessed this potential by adopting the concept of the
“Third Place,” a term coined by sociologist Ray Oldenburg in his book “The Great
Good Place” in the late 1980s.10 This concept refers to a “Social Space” or “Offline
Retail Space” that can provide customers with a relaxing, pleasant, and soothing
environment within the setting of such a Starbucks store. The “Third Place” is an
extension of the “First Place” which refers to the place where people live, and the
“Second Place,” which is where people work or study. Over the years, Starbucks
has continually infused new meanings and content into the concept of the “Third
Place,” providing customers with new pleasures and enjoyments through continuous
improvements in food safety, store format, and product innovation (Fig. 9.1).
For its over 6,000 coffee shops in China, Starbucks has never replicated the same
building model. Instead, the company consistently updates the design and layout of
newly opened stores to ensure that its “Third Place” is always filled with charm
for its customers. These Starbucks stores have now become landmarks in cities
across China and are a parameter for China’s financial media when assessing a city’s

10 Ray Oldenburg, “The Great Good Place”, Paragon House, 1989.

172 9 A Lifestyle in the Third Place: Starbucks’ China Journey

business environment.11 Since opening its first store in Beijing in 1999, Starbucks
has designed and developed a rich variety of experiences in its stores in China.
The first type of Starbucks store features a more professional and coffee culture
atmosphere that brings consumers an extraordinary coffee experience, including
Starbucks Reserve and Starbucks Roastery.
In 2014, 15 years after Starbucks entered the Chinese market, coffee lovers in
China became more adventurous with their taste buds and started exploring different
coffee flavors from various regions as well as different brewing methods. To meet
this demand, Starbucks introduced “Starbucks Reserve,” a brand developed in 2010,
in China, and currently, there are over 600 Starbucks Reserve stores in the country.12
The appearance of Starbucks Reserve stores is mostly black and copper gold color
schemes. They also offer more spacious seating arrangements and all baristas wear
black aprons. Starbucks Reserve coffee is made from a carefully selected small lot of
high-quality Arabica coffee beans, chosen by Starbucks coffee buyers from around
the world’s coffee-growing regions. These beans are sent to one of the six Starbucks
Reserve roasteries worldwide for roasting, resulting in the creation of what is known
as “Starbucks Reserve Coffee”. In addition, Reserve stores are equipped with a wider
range of brewing equipment compared to other stores.
Starbucks Reserve Shanghai Roastery, which opened on December 6, 2017,
is Starbucks’ first overseas roastery since its first one was unveiled in Seattle in
2014. The 2,700-square-meter store is the highest level of store in Starbucks China,
which resembles a real coffee roasting factory. Upon entering the amphitheater-style
building, customers are greeted by a giant two-story-high copper cusk decorated with
over 1,000 traditional Chinese seals and carvings, hand-engraved with the story of
Starbucks and coffee. The Roastery features hundreds of coffee masters who demon-
strate each coffee flavor live for customers using 8 major brewing methods, including
MODBAR® precision self-controlled brewing, Chemex French press, siphon, cold
brew, the unique CLOVER® brewing, and Phantom.13
As customers move through the Shanghai Roastery, they can observe the carefully
roasted green beans dropping into the storage jar on the bar via the “coffee symphony
tube” hanging from the ceiling. These beans are then used to create cups of fragrant
coffee using 8 major brewing methods, which are all demonstrated live by coffee
masters. Instead of queuing at the counter, customers can place their orders using a
handheld POS machine operated by mobile staff.
Another experience is Bar Mixato. As the average customers visit Starbucks
during the daytime, so what does the “Third Place” look like at night? When coffee
and cocktails collide, what sparks? Starbucks Reserve’s “bar” brand, Bar Mixato,
opened on the Bund in Shanghai in March 2019. Many people exclaimed “Starbucks
has opened a bar!” when they heard the news. As of today, Starbucks has 20 Bar
Mixatoes across the country, with Bar Mixato in Shanghai Roastery as its flagship.

11 http://m.haiwainet.cn/middle/3540916/2017/0624/content_30984615_1.html; https://xueqiu.
com/7944046113/178116692.
12 The information is provided by Starbucks China Team.
13 Ibid 12.
9.3 Starbucks’ “Third Place” Concept 173

Bar Mixato features cocktails using Starbucks Reserve coffee or Teavana as the base
and also offers classic cocktails, aperitifs, wines, craft beers, and mocktails.14
The second type of Starbucks store features social value, including signing stores,
green stores, and intangible cultural heritage stores. On May 19, 2019, Starbucks
opened its first Signing Store in Guangzhou, which has since become a unique
and innovative concept. The store employs deaf and hard-of-hearing baristas who,
along with their colleagues, wear specially designed aprons embroidered with sign
language gestures corresponding to the English letters of Starbucks. This innovative
design allows customers to communicate their orders using sign language, creating
an inclusive environment for deaf and hard-of-hearing consumers. Starbucks has long
been committed to creating job opportunities for disabled people, and the Signing
Store is a testament to that commitment. This type of Starbucks is often known as
the “quietest coffee shop.”
The design of the Signing Store reflects a fusion of coffee culture and sign language
elements. The store logo incorporates corresponding sign language graphics under
the regular name of “Starbucks.” To facilitate working for the deaf and hard-of-
hearing baristas and ensure barrier-free communication with customers, the store
has designed a new ordering system that includes a handwriting tablet for commu-
nication, a handheld menu board, and a double-sided display screen. All beverages
and food products in the store are marked with special numbers to help baristas
and customers easily communicate with each other and complete orders without
speaking. The store also has a unique vibrating prompt, and the baristas use sign
language to say “thank you” when handing out coffee, conveying the message that
“although I can’t hear, I’m happy to share this cup of good coffee with you”. Overall,
the Signing Store is an inclusive and innovative concept that promotes diversity and
equal opportunities. So far, more than half of the signing stores worldwide are located
in China, 12 in total.15
Another Starbucks store featuring social value is Green Store, which was jointly
developed by Starbucks and authoritative organizations. The scope of assessment
for being certified covers the entire lifecycle of the store. Every Starbucks Green
Store must pass at least 8 standards of this certification system, which focuses on
the areas such as energy conservation, water consumption management, and waste
disposal. These standards include the use of high-efficiency, low-energy appliances,
100% use of mercury-free LED lighting, low-flow faucets, and adherence to garbage
classification. In addition, Green Stores will also purchase green electricity through
the national green certification platform, striving to use renewable energy to the
maximum extent possible.
Through this series of positive measures to improve store energy efficiency, each
certified Green Store is expected to reduce 10.57 tons of carbon emissions and 301.7
tons of water consumption per year compared to an ordinary Starbucks store of

14 Ibid 12.
15 Ibid 12.
174 9 A Lifestyle in the Third Place: Starbucks’ China Journey

the same size in 2019. As of the end of March 2023, there are 110 Green Stores
nationwide.16
The intangible cultural heritage stores represented another effort of Starbucks’
pursuit of social value. In 2020, Starbucks China opened its first Container Store,
a highly innovative “Third Place” built with 6 containers, located in the Wisdom
Bay Science and Technology Innovation Park in Baoshan District, Shanghai. On
November 10, 2021, Starbucks China opened its first “Heritage Culture Gallery
Store” in Beijing, partnering with a batik cooperative in Danzhai County of Guizhou
Province to bring the art of Chinese batik to customers. This concept store is not only
a new “Third Place” for coffee but also an exhibition place for intangible cultural
heritage art. Starbucks designers and batik craft inheritors collaborated to create
Starbucks’ first batik-themed coffee bar, showcasing a unique fusion of traditional
Chinese art and modern coffee culture. This new concept store continues Starbucks’
commitment to providing customers with diverse and exciting experiences while also
promoting and preserving Chinese culture. In September 2022, the second nationwide
and first Shanghai intangible cultural heritage concept store opened in the Shenyu Li
area of the Haipai Shikumen architectural complex. The blend of rich coffee aroma,
Haipai culture, and intangible cultural heritage concepts creates a unique Third-Place
experience.
The third type of Starbucks store is the pet-friendly store. Since the opening of
the first Starbucks pet-friendly store in Shenzhen in 2017, this concept has been
expanded to nearly 230+ stores in Shanghai, Beijing, Chongqing, Hangzhou, and
other cities as of March 2023. Many Starbucks fans are pet lovers, and pet-friendly
stores provide an ideal option for them to enjoy coffee while spending time with
their furry companions. These stores are typically designed with an outdoor area that
serves as an exclusive playground for pets. Next to the seats in the outdoor area,
specific leash hooks for pets are installed, allowing customers who walk their dogs
alone to safely tie their pets while buying coffee inside the store. The pet-friendly
stores also offer a special menu for pets, including the “Starbucks Pappuccino” made
from freshly whipped cream, and for lactose-intolerant pets, the “Starbucks Zero-shot
Americano” Purified Water is a refreshing drink.
Through the mix of these different experiences of stores, Starbucks has expanded
its innovative in-store setup and provided a complete, creative, and enjoyable “Third
Place” experience for its customers, which has continued for years. In 2016, Star-
bucks opened its Disney Town Store, “Coffee Theater,” in Shanghai, which became
Starbucks’ 11th store in Disney Resorts worldwide. In 2018, Starbucks China opened
its first Coffee Origin Store in Pu’er, Yunnan, highlighting the unique coffee culture
of the region. In 2019, Starbucks China opened its first Reserve Bakery Café at
Grand Gateway Plaza 66 in Shanghai’s Xujiahui business district. Also, in 2019, the
first Starbucks Reserve Bar Mixato opened on the Bund in Shanghai, as mentioned
earlier, introducing a complete bar experience for the first time in China and opening
a new model of integration between coffee and a bar. These new store concepts have

16 Ibid 12.
9.3 Starbucks’ “Third Place” Concept 175

allowed Starbucks to continue innovating and expanding its reach in the market while
providing customers with diverse and exciting experiences.
In Starbucks’ Third Place, Starbucks baristas, also known as “Starbucks Part-
ners,” play a crucial role as they are the frontline workers that directly impact the
quality of service and the overall consumption experience that customers receive.
These partners receive extensive professional training on how to make a perfect
cup of latte, brew coffee by hand, communicate effectively with customers, host
coffee-tasting sessions, and even manage a store. At Starbucks, a new partner under-
goes at least 30 days of rigorous training to become a fully independent barista and
can then put on the “green apron” to serve customers at the counter. However, the
learning never stops. Baristas continue to improve their knowledge and skills through
various online training programs provided by “Starbucks Learning Center,” an in-
house online training platform that covers a wide range of topics, including “Retail,”
“Leadership,” and “Coffee.”17
Simply putting on the black apron, however, is not the pinnacle of a Starbucks
barista’s training journey. Starbucks also offers 7 different special training exams,
including latte art and classic hand brewing, and only those who pass these exams
can receive a corresponding badge. In addition, there is the annual “Starbucks China
Barista Competition”, which started as a biennial event in 2009 but has been held
annually since 2017. The competition includes four individual events, such as the
“Coffee Ambassador Competition” and the “Latte Art Competition”. Only those
who win the “National Coffee Ambassador Competition” can wear the “brown
apron”, which symbolizes the title of Starbucks coffee ambassador. These national
and regional coffee ambassadors serve as the “coffee leaders” of Starbucks, inspiring
and leading their co-workers with passion and expertise in coffee.18
Starbucks also takes their partners to coffee bean origins during harvest season
to allow them to experience the entire process of coffee production from picking to
processing, with the opportunity to engage in in-depth communication with local
coffee farmers to better understand the customs and culture of the coffee production
areas. This initiative, known as the “Origin Trip,” has been conducted in various
coffee origins such as Yunnan in China, Sumatra in Indonesia, Rwanda, and Costa
Rica. Many Starbucks partners who have been on these trips have gone on to start
their own businesses and open coffee shops, bringing the coffee culture they learned
at Starbucks to a wider audience.19

17 Ibid 12.
18 Ibid 12.
19 Ibid 12.
176 9 A Lifestyle in the Third Place: Starbucks’ China Journey

9.4 Starbucks’ Expansion to the Digital Space

In 2011, WeChat, one of the largest Internet platforms, was launched, marking the
beginning of the massive development of mobile Internet in China. To keep up
with this new trend, Starbucks began its digitalization process and started to expand
beyond its physical coffee stores, and for achieving this goal, Starbucks entered into
partnerships with some of China’s digital giants.
On December 8, 2016, Starbucks announced a collaboration with Tencent to
develop a digital gifting service on WeChat, which was launched in early 2017.
Through this program, customers could access the “Starbucks” domain on WeChat
by following the steps of “Me—Wallet—Third-Party Service” on the menu and easily
purchase digital gift cards. In addition, WeChat users could visit the “Starbucks Social
Gifting” section of Starbucks China’s official WeChat account at any time to choose
from a variety of gift options for different recipients on various occasions. Customers
could attach personalized wishes, photos, or special videos to make and deliver a
customized “emotional gift”. These gifts could be stored in the recipients’ WeChat
account and redeemed at any Starbucks store in mainland China at any time.
In September 2017, Starbucks announced a partnership with Alibaba, another
China’s internet giant, and its online payment arm, Ant Financial. The agreement
included the use of Ant Financial’s Alipay as a payment method in all Starbucks
stores in mainland China and the creation of a “Smart Store” in the Starbucks Reserve
Shanghai Roastery, following the concept of “new retail”. Alibaba would also provide
more personalized and customized products and experiences for Starbucks’ flagship
stores on Tmall, Alibaba’s high-end e-commerce platform launched in 2015. Addi-
tionally, Starbucks’ social gift service “Starbucks Social Gifting” would be integrated
with Alipay, allowing customers to send gift certificates and Starbucks gift cards to
their friends and family members with customized greetings, which would be stored
in the recipients’ Alipay accounts and redeemable at any Starbucks store at any time.
In mid-September 2018, Starbucks launched its official online ordering service,
Starbucks Delivers, using Alibaba’s well-developed Ele.me dispatch system.
Customers can log on through either the Starbucks or Ele.me platforms based on their
ordering habits and preferences. When an order is received, the store’s intelligent
dispatch system analyzes the capacity of nearby stores and optimizes the delivery
route for each order based on real-time data, ensuring that the ordered drinks are
delivered to customers as quickly as possible.
Starbucks Delivers was initially tested in 300 stores in Beijing and Shanghai,
and now it is expanded to almost all mainland China markets. To meet Starbucks’
strict delivery requirements, Ele.me developed a well-designed delivery system, from
specially designed delivery cup lids and sealed packaging to dedicated delivery teams
and insulated delivery boxes. For example, the packaging engineers at Starbucks
had to test more than 2,000 beverages and compare 5 designs before finalizing a
hot beverage lid with double layers and a small round return box on the inner layer,
which allowed steam to escape while preventing coffee from leaking during delivery.
9.4 Starbucks’ Expansion to the Digital Space 177

On May 21, 2019, Starbucks launched “Starbucks Now,” a mobile ordering

service that allows customers to order online and pick up their orders in-store.
Initially launched in Beijing and Shanghai, the service gradually expanded across the
entire country. “Starbucks Now” was integrated with Starbucks Rewards, allowing
members to accumulate stars and redeem them for coffee and other gifts. Members
with a certain star level could earn 1 star for every RMB 40 yuan spent using Star-
bucks gift cards on the “Starbucks” APP, accelerating the rate of star accumulation by
25%. The order-picking process was a unique and creative part of the Starbucks Now
experience. Rather than receiving a simple digital number like at many other coffee
shops or restaurants, customers received an exclusive “secret code”, such as “Koi
Today,” “Literary Youth,” or “All Good,” which were randomly generated but created
an emotional connection between store partners and customers. Presenting the code
to the Starbucks partners at the counter would result in the customer receiving their
ordered cup of coffee.
On July 21, 2020, Starbucks unveiled an enhanced version of its Starbucks Now
Service, which was designed to provide customers with an even better experience
in several ways. First, customers were no longer limited to using the Starbucks App
for access, as they could now use any app of their choice, such as Alipay, Taobao,
Koubei, or Amap, to enjoy convenient ordering and faster service while still earning
membership points. Second, a reservation function was added to provide customers
with the flexibility to select the pick-up time via the Starbucks App. Customers could
now choose the nearest store to place an order in advance, save their customized
selection and edit their shopping cart, and pick up their order directly at the pick-up
desk when arriving at the store, thus reducing waiting time in line.
On May 10, 2021, Starbucks launched an augmented function called “Star Tag”
on its WeChat Mini Program and App, which allows customers to save their favorite
drinks and customizations, such as adding more espresso shots or whipped cream,
with just one click when placing their orders. Customers can also share their Star
Tag with friends and family, strengthening their emotional connection. In addition,
customers can explore the coffee preferences of registered stars and celebrities and
easily order the same drink using Starbucks Now™. With Star Tag, customers can
also express their personality and attitude through their views on coffee, generating
posters with coffee views and favorite drink recipes to share on WeChat Moments.
Starbucks has also introduced another innovative service called “Starbucks
Status.” This new feature was jointly created by Starbucks and WeChat and officially
launched on July 28, 2021. Previously, customers used to record their moments at
Starbucks by writing heartfelt words and drawing interesting graffiti in the guestbook
at the store, creating a humanistic atmosphere in the Third Place. With the launch
of Starbucks Status, however, the guestbook has been upgraded and extended to the
digital space. Customers can now scan the QR code on the guestbook and create
their own “Starbucks Status” on WeChat, expressing their thoughts and feelings at
the moment. Furthermore, customers can generate a “Starbucks Status” with just one
click, which includes the Starbucks Now Password, coffee hashtag, and a customized
background picture. This feature enables customers to quickly capture their mood,
178 9 A Lifestyle in the Third Place: Starbucks’ China Journey

instantly upload pictures and a few words on WeChat, and share their Starbucks
experience with their friends.
Another noteworthy service area that Starbucks has explored is “scenario
consumption” through the integration of online and offline experiences. On January
18, 2022, Starbucks announced a partnership with Meituan (3690. HK), a technology-
driven retail giant in China, to unlock more potential of its Third Place in the digital
world. As part of the agreement, Starbucks will establish an exclusive service domain
on Meituan’s platform, called “1971 Salon,” where customers can access Starbucks
Delivers service. In addition, Starbucks will use Meituan’s “Super Store” function
to achieve seamless integration between online and offline activities.
In the coming year, each Starbucks store on Meituan’s platform will have a multi-
functional homepage that integrates functions such as consumption, booking, and
display. Customers can fulfill all their requests, from online ordering for services like
special Starbucks Delivers and coffee express to viewing the store’s event calendar,
reserving space in the “1971 Salon,” and finding a star barista in the store, all in one
place through Meituan’s “Super Stores” page. Each store’s online appearance will be
unique, with different store labels, photos, and videos that best represent the store’s
personality.
There are several scenario services being developed by an exclusive space on
“1971 Salon,” which aims to meet the unique space requirements of each customer
for gathering, meeting, working, and studying. Through digital platforms such as
Meituan, customers can find and book the “Third Place” that best satisfies their needs.
One of the services offered is “Coffee Gathering.” This scenario features a casual
gathering with a few friends that is guided by Starbucks’ coffee masters. Customers
and their friends can discover the different flavors of the coffee world and try to
make their own coffee together. Another service is “Salon Meeting,” which focuses
on business meetings or community events. Customers can easily find a Starbucks
store in Meituan that offers closed or semi-closed spaces that can be turned into
comfortable “meeting rooms” with diversified catering services.
As the number of covered stores expands, Starbucks is continuing to explore and
unlock the full potential of the “1971 Salon” by introducing more coffee courses, club
events, and other activities. It is expected that some of the existing activities, such
as coffee classrooms, birthday parties, pet parties, and sign language classes that are
currently offered in Starbucks stores, will also be organized and managed through
the “1971 Salon” to better serve the communities where the stores are located.
On March 21, 2023, Starbucks unveiled an innovative service that elevates the
coffee experience in China to a whole new level of convenience. Partnering with
Amap, a leading provider of digital map content, navigation, and location-based
solutions in China, Starbucks Curbside provides driving customers with a hassle-free
and time-saving way of enjoying their coffee routines.
Driving customers can simply key in their destination on Amap and place their
orders with Starbucks stores along the route before starting their journey. Amap’s
ETA (estimated time of arrival) technology will guide the store on the right timing
to prepare and deliver the order to a designated nearby pick-up point. All customers
have to do upon arrival is to unwind their car window to pick up their orders from the
9.5 Some Ending Remarks 179

waiting Starbucks partner. The service has been launched in 100 stores in Beijing,
covering most of the city. It is also being trialed in 50 Shanghai stores, with plans to
roll out to over 1,000 stores across China over the next year.20
By using coffee as the key element to connect with customers’ passion for the
beverage, Starbucks has successfully created a unique coffee consumption expe-
rience in the Third Place, which is the core of its service, and further expanded
this experience into the digital space to achieve integration and connection among
various dimensions. Starbucks’ strategic cooperation with digital giants in China,
such as WeChat, Alibaba, and Meituan, has accelerated its digital transformation,
which will bring customers a new Starbucks experience that blends online and offline
services, providing surprises and warmth with every cup of coffee delivered.

9.5 Some Ending Remarks

Starbucks’ journey in China is truly remarkable and could be instrumental for many
businesses interested in entering the Chinese market, which has hundreds of millions
of consumers. As evident from the intriguing stories discussed above, Starbucks has
brought not only just high-quality Arabica coffee beans purchased from the world’s
best coffee-growing regions to China, but has also created an emotional connection
between its baristas and customers by delivering every single cup of coffee with care,
following its mission of “to inspire and nurture the human spirit—one person, one
cup, and one neighborhood at a time.”21
Starbucks’ success in China is an exciting testament to the power of innovation.
As mentioned earlier, many of Starbucks’ innovations, similar to Apple’s iPhone,
are “supply-side-oriented,” based on the company’s knowledge and insight on both
products and customers. Since its entry into the mainland China market, Starbucks
has been at the forefront of innovation by constantly developing new and innova-
tive coffee products and creative consumption scenarios that were unexpected by
consumers before their launch but well-received when they arrived in the market.
These “supply-side-driven” innovations have greatly enhanced Starbucks’ reputation
as an inevitable leader in the Chinese coffee market, which, in turn, attracts more
consumers to learn, experience, and enjoy the “lifestyle” designed and developed by
Starbucks.
This coffee giant predicts that by 2030, there will be 395 million middle-class
households in China, and the “average number of cups of coffee consumed per year”
by Chinese consumers will increase from 10 cups in 2019 to 14 cups in 2025. As
the “coffee population” and “frequency of coffee consumption” continue to grow,
digital orders are expected to surge. In particular, the coffee delivery of digital orders

20 Ibid 12.
21 https://livingourvalues.starbucks.com/en-us/mission-values.
180 9 A Lifestyle in the Third Place: Starbucks’ China Journey

is expected to increase by 200% by 2025 compared to its digital order sales in the
fiscal year of 2022.22
Starbucks is taking steps towards sustainability by opening a Greener Lab Store,
which began in September 2021 through initiatives such as the opening of one of
the world’s most environmentally friendly Starbucks stores in Taikoo Li, Qiantan,
Shanghai. The store offers a wide range of delicious GOOD GOOD food options with
lower carbon emissions, and over 50% of its food and dairy beverages are made from
plant-based ingredients. The store also offers reusable cups, which can be purchased
for an additional RMB 15 yuan with any hand-crafted beverage. Customers who use
these cups in other Starbucks stores can enjoy an RMB 4-yuan discount. Dine-in
customers are also encouraged to use store mugs or bring their own cups to reduce
the consumption of disposable cups. According to its China Strategic Vision 2025,
Starbucks aims to operate 2,500 Greener Stores by 2025.
In addition, Starbucks has introduced two plant-based dairy alternatives—oat
milk (April 2020) and almond milk (April 2023)—at parity pricing across all stores,
encouraging customers to adopt greener lifestyles.
In March 2023, Starbucks announced plans to become the first coffee retailer in
China to pilot a water replenishment project. In partnership with The Nature Conser-
vancy (TNC), the Qiandao Lake Water Replenishment Project will improve water
quality in the local ecosystem by focusing on sustainable agriculture and wetlands
restoration, replenishing at least 1.5 million tons of water a year by 2030, equivalent
to about 600 Olympic sized swimming pools, and enough to meet the annual water
consumption needs of more than 23,000 people.
Digitalization will be a key focus for Starbucks in the future. In its China Strategy
Vision 2025, the company aims to accelerate the speed of its digitalization and
technology-enabled store operations, with increased investment in the Internet of
Things, machine learning, and algorithmic technologies. This includes the construc-
tion of Starbucks’ first dedicated digital technology innovation center in China, with
an investment of approximately RMB1.46 billion (about USD $220 million), to
develop its multi-channel business. The company plans to double its sales of coffee
delivery business by 2025 and expand the coffee peripheral products and gifts busi-
ness, with the help of digital technologies. Starbucks also intends to continue devel-
oping its Starbucks Rewards membership, offering more diversified, personalized,
cross-channel, and digitalized interaction experiences through the continued upgrade
and empowerment of its big data. The company aims to attract more than 170 million
registered members and double the number of active members between fiscal year
2022 and 2025.23
Finally, let’s turn our attention to the supply chain, which is crucial for realizing
and ensuring the quality of all of Starbucks’ ambitious plans. Starbucks is investing
RMB 1.1 billion in the Starbucks Coffee Innovation Park (CIP), which is expected
to begin operations in the summer of 2023. Located in Kunshan near Shanghai, it
will feature Starbucks’ largest coffee roasting plant outside the US market. It will

22 https://www.starbucks.com.cn/about/news/starbucks-strategic-vision/.
23 https://investor.starbucks.com/press-releases/financial-releases.
9.5 Some Ending Remarks 181

process an average of 135 million pounds of beans shipped from global production
regions each year and distribute them to all Starbucks stores across the country. The
Integrated Distribution Center, which spans approximately 33,000 square meters of
land, will meet a significant portion of Starbucks’ coffee bean needs in China. By
shifting Starbucks’ baking and logistics systems from a decentralized setup to a more
centralized one, the center will reduce logistics and labor costs, while improving the
company’s traceability for food safety through upgraded digital systems. The CIP will
feature sustainable roasting technology that reduces carbon emissions by over 30%.
Up to 30% of energy consumption will be generated through renewable sources.24
From products to services, from dine-in to take-out, from physical stores to digital
channels, from coffee consumption to emotional connections, and from satisfying
customers’ biological beverage needs to creating a relaxing, pleasant, and elegant
lifestyle for consumers, Starbucks’ venture in China well exemplifies the concept of
the Third Place and has marvelously documented its expansion from one to the other.
With its Vision 2025, Starbucks is expected to continue its journey of evolution and
further enrich its various spaces for consumers in China down the road.

24 Ibid 12.