Starbucks partners with Alibaba Group to deliver coffee in China

Starbucks joins with Alibaba Group to deliver its coffee in Chinese cities beginning this fall. The company hopes the move will revive the growth of sales in its second largest market where it faces aggressive local competition.

In June Starbucks noted that it was seeking such a tie after it reported a slow down in the growth of Chinese sales. This was partly caused by a government crackdown on third-party delivery firms that had been helping drive orders from its cafes.

Starbucks CEO, Kevin Johnson told reporters: “I consider this strategic partnership to be one that ... will just be rocket fuel for Starbucks’ growth and continued expansion in China.”

Pilot delivery services begin in Beijing and Shanghai

A pilot project will see 150 Starbucks stores in Beijing and Shanghai begin delivery services. By the end of the year, the company and Alibaba hope to expand delivery to more than 2,000 stores in 30 different cities.

The partnership will involve collaboration with other Alibaba group businesses including the delivery platform Ele.me, the supermarket chain Hema, and online retailers Tmall and Taobao. Moble and online payment platforms, Allpay will also be involved.

Partnerships should improve Starbucks' delivery system

The delivery program should leverage Ele.me's already 3 million registered subscribers. The aim is to deliver orders within a half hour. Inside Hema stores Starbucks will establish "Starbucks Delivery Kitchens" and will use the supermarket's own delivery system to deliver orders. A local startup, Luckin Coffee, wants to go in competition with Starbucks and charges less than a dollar per order and claims its deliveries take only an average of 18 minutes.

No financial details of the deal released

There were no details of the agreement released and neither would say whether there had been discussing of equity stakes. The companies said they had been discussing the deal for more than a year.

China is a rich market for Starbucks but with fierce competition

There is a burgeoning cafe culture in China that has helped Starbucks grow in spit of saturation in the US. It has 3,400 stores in China and by 2022 it hopes that number will double.

However, competitors such as Luckin have rapidly expanded and offer cheap delivery, online ordering, big discounts, and good pay for its staff.

China has offered Starbucks rich pickings in recent years, thanks to a burgeoning cafe culture which has helped offset saturation in the United States. It has 3,400 stores in the country and plans to almost double that number by 2022. Luckin said that it planned to more than double its stores to 2,000 just by the end of this year. Starbuck's partnership with Alibaba is no doubt meant to also provide the same services as Luckin.

Starbucks

According to Wikipedia: "Starbucks Corporation is an American coffee company and coffeehouse chain. Starbucks was founded in Seattle, Washington in 1971. As of 2018, the company operates 28,218 locations worldwide...Starbucks locations serve hot and cold drinks, whole-bean coffee, microground instant coffee known as VIA, espresso, caffe latte, full- and loose-leaf teas including Teavana tea products,[7] Evolution Fresh juices, Frappuccino beverages, La Boulange pastries, and snacks including items such as chips and crackers; some offerings (including their annual fall launch of the Pumpkin Spice Latte) are seasonal or specific to the locality of the store. Many stores sell pre-packaged food items, hot and cold sandwiches, and drinkware including mugs and tumblers; select "Starbucks Evenings" locations offer beer, wine, and appetizers.[8] Starbucks-brand coffee, ice cream, and bottled cold coffee drinks are also sold at grocery stores. "

The first Starbucks location outside North America was in Tokyo in 1996 but now overseas locations make up almost a third of its stores. Between 1987 and 2007 the company has opened up an average of two locations daily.

Alibaba Group

Wikipedia describes Alibaba as follows: "Alibaba Group Holding Limited... is a Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate founded in 1999 that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals, as well as electronic payment services, shopping search engines and cloud computing services. It owns and operates a diverse array of businesses around the world in numerous sectors, and is named as one of the world's most admired companies by Fortune."

As of June this year the market cap of the company was at $542 billion. It is one of the world's top ten most valuable and largest corporations. As of this year it has the 9th highest global brand value. The company operates in more than 200 countries. It is the world's largest retailer and one of the largest Internet and AI companies.

Previously published in Digital Journal