China business writer Shaun Rein offers his insights into why and how (despite his initial doubts) Starbucks has managed to establish China as its soon-to-be second largest market outside of North America:

Instead of trying to force onto the market the same products that work in the U.S., such as whip cream-covered frozen coffee concoctions, Starbucks developed flavors, such as green tea-flavored coffee drinks, that appeal to local tastes. Rather than pushing take-out orders, which account for the majority of American sales, Starbucks adapted to local consumer wants and promoted dine-in service.

By offering comfortable environments in a market where few restaurants had air conditioning in the late 1990s, Starbucks become a defacto meeting place for executives as well as for the gathering of friends. In other words, Starbucks adapted its business model specifically for the Chinese, rather than trying to transplant everything that worked in America into China, as so many brands such as Best Buy and Home Depot have done. Such approaches often proved shortsighted and ill-fated.

Meanwhile Stan Abrams over at China Hearsay, who was also initially skeptical of Starbucks’ China prospects, ruminates how, Starbucks’ business strategy aside, the addictive nature of coffee itself has played a strong role in the chain’s ongoing success in China:

I think you have to factor in caffeine. I think human beings crave stimulants like caffeine, and only having one choice of hot caffeine (tea) isn’t enough in some countries. Moreover, we also like to drink our caffeine cold/room temperature (e.g. cola). Cola is a weird beverage taste-wise; why has it done so well?

As a longtime addict, I believe this part of the coffee story needs to be mentioned.

But I think there’s even more here to talk about than an addictive substance. Think about the relative success of KFC vs. burger chains in China. Yes, lots of kids here eat burgers these days, but fried chicken seemingly appeals to Chinese palates much more than sandwiches. I don’t think that has anything to do with addictive chemicals, and yet I’m not sure that just saying “it’s cultural” is a sufficient explanation.

Perhaps sometimes we, as biological organisms, are just attracted to certain kinds of foods. We obviously have a predilection for caffeine. We also love our alcohol, which has been around since the Agrarian Revolution thousands of years ago. As soon as we started cultivating crops, we turned some of the harvest into goofy juice. That’s just the way we roll.

Both insights are valid, but the former rings especially true, given the ensuing glut of other coffee chains (i.e. your Shangdaos and Costa Coffees) that have entered the market in the years since Starbucks first set up shop here. Effective localization has certainly paid off for a number of fast-food outlets in the past two decades and it will be interesting to see if others (I’m looking at you Five Guys, In & Out and Chipotle) will follow suit.

Share your thoughts below.