It’s a first for Starbucks, the Seattle-based coffee chain is getting into the business of growing its own beans.
Starbucks is permanently planting its flag in the Far East, opening its first bean farm and processing plant in China’s southwestern Yunnan province. The company hopes their first base farm will help them corner the relatively untapped Chinese coffee market.
“We’re in 31 cities, and in cities that most Americans have never heard of, and the response is like Shanghai and Beijing, it’s unbelievable to us,” Starbucks chairman Howard Shultz told reporters after the announcement on Friday. “And so we want to be aggressive and at the same time we want to demonstrate the kind of company we are, in doing the right thing. And by that I mean, making sure we’re investing in our people, providing our customers with a great place to enjoy coffee.”
Starbucks hopes to make China the brand’s second home market outside of the U.S., but they acknowledge that it will be hard to convince a nation of tea drinkers to swap over to coffee. Research company Euromonitor International estimates that coffee sales in China climbed 9 percent last year to $704.7 million.
Since opening its first store in 1999 in Beijing, Starbucks has expanded to more than 800 locations across greater China. Coffee has made its way into Chinese society, becoming popular with the country’s young urban professionals because of its associations with Western life. Many Chinese drinkers picked up the daily habit while living abroad and have brought it back home with them. By far, the instant variety is the most popular way to have a cup of joe in China, but a coffee house culture has emerged in Beijing, Shanghai and Guangzhou.
This is an important first for Starbucks, the company has never grown beans on such a massive commercial scale before– currently Starbucks purchases their coffee from farmers in over 30 different countries. Industry analysts say that this is also an important strategic move for Starbucks because of growing concern in the industry over the quality of beans from Central and South America. Coffee analysts say an all-out bidding war has broken out between distributors for a shrinking supply of high quality beans because aging trees farmed year-after-year in Central and South America have started to produce lackluster, bland yields.
Collaboration of Starbucks:
Starbucks has agreed to collaborate with the local government to help farmers promote responsible coffee-growing practices and develop a localized coffee. Under an agreement signed with the Yunnan Provincial government, the Chinese government will invest $453 million to expand production by more than five times to 200,000 tons by 2020 at the farm. According to the U.S. Department of Agriculture, only around 13,000 tons of coffee was harvested in China in 2001.
“Starbucks is proud to collaborate with the Yunnan government to share our coffee knowledge to help Yunnan continue to develop into a top-quality coffee growing region and bring the distinctive Yunnan coffee taste to our customers around the world,” said Schultz.
The Starbucks’ base farm will be growing Arabica beans; a bitter, earthy variety– the first beans aren’t expected to be harvested until three years from now. Company officials say they will ship the beans to the U.S. for roasting, but admit a roasting facility in Asia is inevitable.
Additionally, the company will operate a Farmer Support Center, its first in Asia and third globally following Costa Rica and Rwanda. Starbucks agronomists and quality experts will work directly with Yunnan’s coffee farmers to provide resources and expertise to promote responsible coffee-growing practices that improve quality and enhance the size of the yield. Research will be conducted on areas such as new varietals for local adaptation, disease resistance and flavor improvements.
Best Place in China to Invest:
“We are focusing on areas where we can have the greatest impact; ethical sourcing, environmental stewardship, and community involvement,” said Wang Jinlong, senior vice president of Starbucks Coffee Company and chairman of Starbucks Greater China.
This isn’t Starbucks first move in Yunnan; in early 2009 the company collaborated with province coffee farmers and suppliers to launch the South of the Clouds Blend.
Yunnan is one of the few places suitable to grow coffee in China and government officials have been trying to capitalize on the region for decades.
“There is still much room for development as the coffee industry in Yunnan is expected to become a new pillar industry creating more than [$1.5 billion] of output value,” The People’s Daily Online reported Sunday.
Instant coffee powerhouse Nestle has been in the region since the late 1980s and until recently it was only thought the Yunnan’s beans were good enough for lower-quality instant coffees. Kraft Foods and Maxwell House also have a presence in Yunnan.