Starbucks is among the latest of the beverage multinationals to pin its growth hopes in the Asia-Pacific region, generally, and in China, specifically. The Seattle-based coffee giant is growing by leaps and bounds, by as much as 18 percent for the full year, according to analysts, who also say, however, that Asia, and China specifically, are a concern.
“Starbucks is opening more stores in this key market than any other and is counting on having a majority of its growth over the next decade come from this part of the world. But with big signs that Chinese growth is stalling, is there reason to worry about Starbucks prospects,” wrote analyst Jason Hall of website Motley Fool on the eve of Starbucks releasing its Q4 results last month.
When Starbucks released its quarterly results a day later, it said same store sales in the China and Asia Pacific segment increased 6 percent, but that it had fallen short of the projected 9.6 percent growth for the region. The growth in China also fell short of the same-store sales in Americas, which increased 8 percent during the quarter.
No one at Starbucks and few of the financial observers are pushing the panic button over this. But it is the latest illustration of how beverage companies have needed to revise their expectations about China. After all, the Chinese economy has gone from boom to bust (relatively speaking) in seemingly the blink of an eye, right?
It’s not that simple. Macroeconomic forces are at work against companies doing business in China, but for beverage companies, in particular, cultural and political factors also are in play in very significant ways. The current situation for beverage companies is in stark contrast to just a few years ago, when the growth expectations for many in China were linear and virtually limitless.
Our cover feature, reported and written by editor-at-large Jeff Cioletti, outlines the issues in China—and Russia—another macro market targeted for huge growth by beverage multinationals just a few years ago. It isn’t that the Chinese market isn’t growing (it is), but as Jeff reports, the questions are whether the economic impact is cyclical and whether the socio-political factors at play in the market will stubbornly affect growth prospects.
Our cover feature makes for an interesting read on many levels, not the least of which is that it reveals something of a universal truth about the state of global consumer marketing today: that even in markets with opportunities as huge as China (and Russia), growth is likely to be much less linear and more long-term.