Starbucks plays the “long game” in China
Coffeehouse kingpin Starbucks is right on the cutting edge of the trade war between China and the US. A massive American business that considers China its second market, the company hasn’t been hit by tariffs yet – but CEO Kevin Johnson says that he can’t rule out the possibility. Despite that, he’s not worried. The reason? Starbucks’ commitment to China is now so deep, and so well established, that he thinks the brand can weather the storm.
Starbucks’ share price has risen by 30% so far this year
Source: Yahoo Finance
Speaking to CNBC’s Jim Kramer, Johnson said: "we haven't seen any significant impacts from the geopolitical situation between the U.S. and China, but that said, we're not immune. But because we really have built Starbucks in China for China, it really is operating as an entity in China that's relevant to the consumer, to the culture, and we're playing the long game."
Starbucks has been focussing on China for almost 20 years, beating not only other players in its own industry into the country, but most ‘other players’ full stop. Few big brands have made the type of investment into China that Starbucks has in terms of time, talent, money and innovation. For example, the country’s nascent coffee market – in percentage-of-the-population terms small, but by no means insignificant – is largely Starbucks’ creation. It imported not just coffee, but the western concept of a coffee house, into China. And, as China evolved beyond the western copy-catting that defined its early years of growth, Starbucks evolved with it, offering a variety of China-first drinks and concepts.
Johnson added, regarding the trade war: "We operate in 78 countries around the world and so we deal with geopolitical situations all the time. I think by engaging with an attitude of optimism and 'How can we collaborate to create a better environment for all,' we can find great paths forward."
Dominion holds Starbucks in its Global Trends Luxury Fund.
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