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Starbucks Bets On a Chinese Expansion

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Starbucks Bets On a Chinese Expansion

Business

Starbucks Bets On a Chinese Expansion

Starbucks Bets On a Chinese Expansion

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More in the Series

The Starbucks coffee company views China as the fastest growing market for its products outside of the United States. The company already has more than 140 stores in China. As part of this week's series on U.S. relations with China, Steve Inskeep speaks with Starbucks chairman Howard Schultz.

STEVE INSKEEP, host:

The business report continues our look at the United States and China.

If your town seems to have a Starbucks on every corner, you would feel at home in some parts of China. Starbucks has 140 Chinese stores, designed much like their American counterparts. The coffee company's efforts show some of the ways that Americans are competing for a share of China's new wealth. We contacted Starbucks Chairman Howard Schultz just after he took a trip to China.

Mr. HOWARD SCHULTZ (Chairman, Starbucks): The stores that we've opened in China are larger in size than the dwellings in which people live, so our stores have taken on a life of their own in terms of an extension of people's home and office. About 80 percent of our customers in the US take our coffee to go, and over 80 percent of the Chinese customers have our coffee in the store and stay very long, enjoying the environment, and we're happy with that.

INSKEEP: When you say that a lot of your stores are bigger than a lot of people's houses, it just underlines that this is a place with very modest living standards. How do you get people that are making $100 a week to spend $5 on a drink?

Mr. SCHULTZ: Yeah. Well, there--you know, the customers that are coming in the Starbucks are making more than that. But let me put it in perspective for you that I think is interesting. I'm told that over 300 million Chinese people every day are using a cell phone, and when you think about the fact that they have leapfrogged traditional technology, and many of those people never had access to a telephone at home, it demonstrates the adoption that they have to new technology and Western-type opportunities. So there is a large, large group of people with disposable income.

INSKEEP: What are the major challenges of doing business in China?

Mr. SCHULTZ: Well, the major challenges are you don't see any `For Rent' signs. So you really need to establish very strong relationships with government officials in order to build stores and open up stores and create distrib--channels of distribution. And we wanted to make sure that in order to build a very large company in Asia and China, we invested heavily ahead of the growth.

INSKEEP: Given that you've got a company that prides itself on an image of being ecologically friendly, environmentally friendly, employee friendly, how do you do business in a Communist dictatorship without losing your soul?

Mr. SCHULTZ: I think that is a very important and right question. What I saw and in the meetings I had with government officials was a very strong level of openness and understanding that a business like Starbucks, which has built itself on this balance between profitability and benevolence, is the kind of business that they would like to see succeed in China. And what I mean by that specifically is that the Chinese government is very interested, I think, in opening up their doors to Western companies and Western brands and especially those companies that can come and be very respectful of the heritage and the tradition of how that country was built.

INSKEEP: Do you ever talk to an official, and he's quite friendly to you and quite receptive to what you want to do, but, well, you get an uneasy feeling about it?

Mr. SCHULTZ: No. I have had--I think when you enter a country like China or, for that matter, any other country, you really have to come hat in hand and demonstrate a willingness to understand their way of thinking and their way of life. And I think what we're most proud of is the foundation that we built in China is very, very strong because the values and guiding principles of our company are the same that they are in America, despite the fact that we're doing business in China.

INSKEEP: Howard Schultz of Starbucks, thanks very much.

Mr. SCHULTZ: Thank you for having me on.

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