Starbucks revealed its long-term strategic plan on Tuesday, outlining a massive increase in growth in existing and future overseas markets, especially in the India, South East Asia, and Africa regions. The company, with headquarters in Seattle, plans to open 3,000 new outlets in these areas within the next five years one of the fastest-growing expansion strategies in Starbucks history.
The news comes as the company in a bid to expand in the growing middle-income consumer base and rising demand for coffee in these countries. Mr. Kevin Johnson, the CEO of Starbucks, was driven by this same strategic development when he made a statement during the launch conference at the Starbucks head office.
“We see tremendous potential in these dynamic and rapidly growing markets,” Johnson stated. “Our research indicates a rising demand for premium coffee experiences, and we believe Starbucks is uniquely positioned to meet this demand while also creating significant value for our shareholders.”
India will be the market of most importance for this expansion, with the company’s plans to open 1,500 stores by the year 2029. This would expand Starbucks’ access in India more than three times than it is currently, with its cafés beginning operation in 2012 with the Indian partner Tata Consumer Products Ltd.
Tata Starbucks CEO Sushant Dash was optimistic about the expansion plans when he had the following to say. “The coffee culture in India is evolving rapidly, and we’ve seen strong growth in both our metro and non-metro stores. This expansion will enable us to introduce Starbucks brand to so many more consumers within the Indian market.
Across southeast Asia region, the coffee giant disclosed a plan to open 1,000 stores new stores in Vietnam, Indonesia and Thailand respectively. These countries have been singled out because they bear the potential for higher growth in the consumers’ age group, boosted by rising urbanisation.
Africa remains a promising market for the development of Starbucks, starting a number of new markets in Africa. It targets to open 500 stores over the next five years across countries such as Nigeria, Kenya, and Morocco. This step to Africa has been taken as other global players in the Food and Beverage business have also started to step up their stakes.
To strengthen this growth, Starbucks said it would be committing $2 billion in supply chain and logistics networks within these markets. It involves expansion of new roasting and distribution centres to preserve quality as it moves to other levels of production.
With the expansion, the company also underlined its focus on the sustainability and ethical purchasing of materials. Starbucks intends to successfully partner with local coffee farmers in these areas to provide technical assistance in increasing production as well as the quality of beans produced in an organic manner.
“As we grow, we remain committed to our core values and our mission to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time,” Johnson added.
The current expansion plans have received mixed reviews from analysts within the industry. As others have noted, there appears to be tremendous upside in these markets; some have raised their concerns about the ability to get localization right and the regulatory hurdles that companies are likely to face.
James Thompson, a retail analyst at Morgan Stanley, commented, “Starbucks’ expansion plan is ambitious and could drive substantial growth if executed well. However, it will be important for the company to avoid the local culture and competition in order to achieve a good standing in these diverse markets.
Starbucks also aims at new food and beverage outlets in each market where they will launch new products that will suit local palates. This particularly spans from designing new regional specialties for drinks and foods and using regional design motifs in store design.
Stock prices of the company increased by 3% after the news because investors are usually positive about expansion plans. But some financial analysts have noted that perhaps it may take as long as three years before the effects of this expansion will be seen in Starbucks’ balance sheet.
This is the credibility test as Starbucks moves to this new level of expansion, charging for adding value for shareholders while seeking to retain its identity amid different markets. If this initiative turns out to be successful, it will change the geographical distribution of the coffee industry across the globe, and at the same time, Starbucks may be confirmed as the epitome of a truly global fast food chain.