Source: Business Week Chinese version
Starbucks President and CEO Kevin · Kevin Johnson confirmed on August 3rd, Beijing time that he has officially signed a cooperation agreement with Alibaba Group to build a coffee delivery service in China. According to the exclusive agreement they signed, Starbucks will be able to use all of Alibaba's assets to develop its coffee delivery service in China, including the hungry food delivery platform and the supermarket chain.
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The partnership will help Starbucks provide coffee delivery services to 150 coffee shops in Shanghai and Beijing, and expand coffee delivery services to 2,000 coffee shops in 30 cities across China by the end of 2018.
In Starbucks' third-quarter earnings report, its China business performance was slightly weak. In the Chinese market, Starbucks revenue increased by 17%, but its same-store sales fell by 2%. In history, the Chinese market is an important driving force for the development of Starbucks.
After confirming that he will cooperate with Alibaba, Johnson accepted a Bloomberg TV interview, saying that the cooperation is “a revolutionary strategic cooperation in the modern retail industry”.
The following are some of the interviews:
(Q= Bloomberg TV A= Johnson)
Q: With the cooperation with Alibaba, what are the key factors that determine the correctness in China?
A: The inspiration came from a year ago when I met Zhang Yong (the CEO of Alibaba) in Hangzhou. He talked about their development goals, and I analyzed two transformative factors in the retail industry of modern society. The two sides have some common visions, so they decided to achieve this transformational cooperation. We believe that this move will definitely make us even more powerful.
Q: What do you think of China's advanced competitive situation? The newly established coffee brand like Ruixing is expanding very fast. Does Starbucks think that the existence of these companies is a serious threat?
A: Starbucks has been around for 47 years, and there has never been a competitor. We have operations in 77 countries, each with competitors. The opportunities in the Chinese market are endless, so of course there will be constant influx of competitors, which is expected. For us, we have to do our own business —— to do advanced coffee, providing an advanced user experience.
Q: Will you fight against competitors through mergers and acquisitions?
A: No, we have our own system development strategy. Starbucks will build more than 600 stores each year, and today there are more than 3,400 Starbucks in China. In the next few years, the number of Starbucks in China will soon exceed 6,000. In addition, cooperation with Ali is also part of the strategy.
Q: Do you seem to have learned a lot from these start-ups?
A: I realize that innovation is everywhere. I have to say that Chinese companies have very advanced innovations. Therefore, cooperation between Starbucks and Alibaba is particularly important. Our business in China is specifically for the Chinese market. All here. They are responsible for designing storefronts, researching and launching new foods and beverages, developing digital businesses, and the team's innovative ability is very strong, and now the cooperation with Ali will bring us new business breakthroughs.
Q: In the Chinese market, Starbucks revenue increased by 17%, but its same-store sales fell by 2%. When did this change begin?
A: Our business in China has been disturbed to some extent because we are expanding significantly. The speed of opening 600 stores every year is our current concern. In the future, we will increase the coffee business, digital business, and integrate virtual stores into all Alibaba assets, which will enable us to provide Alibaba's 500 million daily users. Starbucks services, which will also promote the development of Starbucks' business in China.
Q: Can you disclose your plans to 2019?
A: There will be 150 stores in Beijing and Shanghai that will provide coffee delivery services in September. By the end of this year, 2,000 stores in 30 cities in China will also participate. This will definitely help our 2019 earnings, and I am confident that earnings will increase in the next two quarters.
Q: Today, Sino-US trade frictions continue. Do you worry that friction will make Starbucks a victim?
A: We have very close ties with Chinese consumers and Chinese culture, so we will always focus on doing our own business. After all, we value long-term development.