Starbucks has signed a massive deal with China's most famous online retailer to cement its dominance of the coffee market
- Starbucks has agreed a new delivery partnership with Alibaba, one of China's largest online retailers.
- Starbucks already controls 80% of China's coffee market, and this will help it get even more.
- The new deal will see Starbucks integrate a "virtual store" in online shopping and payment apps.
- It comes after Starbucks' same-store sales in China slipped 2% in the past quarter amid fierce competition new regulation.
- People in China have been consuming more and more coffee in recent years.
Starbucks is cementing its dominant status as China's largest coffee provider with a new delivery partnership with Alibaba, one of the country's most prominent online retailers.
The Seattle-based company has signed a new deal with Alibaba, the e-commerce giant owned by Jack Ma, to expand its delivery services throughout China, CNBC reported on Thursday.
Starbucks already controls some 80% of the Chinese coffee market, and the tie-up will open even more opportunity for them.
The new deal will see Starbucks integrate a "virtual store" to Alibaba's online shopping and payment apps - such as Alipay, Taobao, Tmall, and Hema. That would allow users to order from Starbucks on their phones, and have their drinks and food delivered to them in person.
"That opens up 500 million or more active users of those apps that will have access to Starbucks," Starbucks CEO Kevin Johnson told CNBC.
Partnering with Alibaba also allows Starbucks to work with Ele.me, an Alibaba-owned online food delivery service, to open 150 stores in Shanghai and Beijing, and broaden delivery to 2,000 stories in 30 cities around China by the end of 2018.
The coffee giant also plans to build up to 600 "Starbucks Delivery Kitchens" in Hema, a futuristic, brick-and-mortar supermarket chain also owned by Alibaba.
The new partnership comes after Starbucks' same-store sales in China slipped 2% in the past quarter amid fierce competition and tightened regulations on delivery services.
Starbucks already controls 80% of China's coffee market, the Financial Times reported, citing Euromonitor statistics. It generated $3.24 billion in yearly revenue from China and the Asia-Pacific region last year - 15% of its global total.
China, traditionally a tea-drinking country, is starting to consume more and more coffee. Euromonitor, the market research consultancy, reported a dramatic rise in demand for freshly-brewed coffee in the country from 2017.
Last December, Starbucks also opened a 30,000-square-foot, two-story store in Shanghai, where visitors can watch their coffee being roasted from start to finish. It is the largest Starbucks in the world.