Aug 1, 2018

Why Starbucks needs to start delivering coffee in China

Food delivery bikes in Beijing. Photo: Zhang Peng/LightRocket/Getty

Have you ever ordered your morning cup of coffee delivered to your office? I asked 28 colleagues — all based in the U.S. Just two said "yes," and two others that said they might. Twenty-four basically told me to get lost.

  • Not so in China, where a delivered cup of steaming-hot coffee, brought by motorbike, is the new new thing.

The big picture: Tea is still king in Chinese offices. For those who have switched, coffee is an inconvenient luxury — few offices have brewing machines, and it can take ages to walk to a cafe on the packed streets.

  • But the other thing about China is a mania for on-demand delivery — Chinese want what they want, and they want it now.
  • Hence the opening for delivered coffee, including a reported new venture between Starbucks and Alibaba.

The latest: The partnership between Starbucks and Ele.me, Alibaba's food delivery arm, is to be announced Thursday, report the WSJ's Xiao Xiao and Liza Lin. "Alibaba and Starbucks are always exploring new ways to deepen our long-term partnership in China," an Alibaba spokesman said. Starbucks didn't respond to an email.

The backdrop:

  • Starbucks has had incredible success in China, capturing 80% of the coffee market in 2017, per Euromonitor International.
  • But there's a new competitor. Luckin Coffee, a Beijing startup that launched in October, has already opened 660 Chinese stores.
  • Luckin's strategy? Super-fast coffee delivery via scooters — and if your coffee is more than 30 minutes late, it's free.

The bottom line: "Chinese culture is less relaxed that American culture," says Hans Tung, managing partner at GGV Capital, a VC firm that works in China. So even the mid-morning coffee run is an indulgence. "People say, 'Why should I go out there? I just want my coffee now.'"

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