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Starbucks Corporation (NASDAQ:SBUX) is benefitting big from a budding coffee culture in the world’s most populous nation.
As Reuters reports, the China represents by far the largest source of growth for the international coffee chain:
Starbucks dominates in China and is growing fast in the market, while in the United States it comes under pressure from a “third wave” of boutique coffee sellers and cheaper rivals.
Executive chairman Howard Schultz, speaking at the launch of Starbucks’ first overseas “Reserve Roastery” – an opulent flagship store with gourmet coffees and a bakery – said China was on track to be “bigger, more powerful and more significant” than the firm’s U.S. business.
“With the rising middle class and the opportunity in China, the market is going to be much larger here,” he said, adding Starbucks was looking to hit 10,000 outlets in China within a decade, catching up with the United States in terms of stores.
According to market data from research firm Euromonitor, Starbucks held a commanding 54.8% share of China’s $3.8 billion specialty coffee market in 2016.
However, that could be changing soon. Small brands and independent coffee shops are cropping up everywhere in China these days, in response to skyrocketing demand in a nation that’s been traditionally made up of tea drinkers.
Still, Starbucks likely has plenty of growth left there, as China’s younger generation embraces the western java-drinking tradition in great numbers.
Starbucks Corporation shares fell $0.45 (-0.75%) in premarket trading Friday. Year-to-date, SBUX has gained 8.70%, versus a 20.32% rise in the benchmark S&P 500 index during the same period.
SBUX currently has a StockNews.com POWR Rating of B (Buy), and is ranked #14 of 52 stocks in the Restaurants category.
