Starbucks' Plan To Break Through China's Tea Consuming Middle Class

Starbucks Corporation SBUX announced further expansion into China with its first international Starbucks Roastery and Reserve Tasting Room. The Shanghai, China, location will debut in 2017 as part of its move to further expand into China and capitalize on its middle-class population.

The 2,700 square-meter (30,000 square-foot) Starbucks Roastery will be part of the soon-to-be built HKRI Taikoo Hui Project, "Shanghai's newest premium world-class retail, office and hotel area."

The news follows the world's leading coffee maker's April announcement that Starbucks will be opening a Roastery in New York's meatpacking district in 2018.

These new locations will reflect the company's first roastery location, which debuted late 2014, in Seattle, Washington.

How Does The Roastery Differ?

According to the press release, at Roaster locations, "customers will be able to watch freshly-roasted beans arrive, connect with Starbucks coffee specialists and master roasters, enjoy a unique beverage and food menu, as well as savor some of the most unique small-lot coffees brewed multiple ways."

"The Starbucks Roastery environment honors coffee innovation as a modern day Willy Wonka experience, where customers are only feet away from the theatre and artistry of our coffee craft. I am confident this will be one of the most highly-anticipated store openings in our international markets," Howard Schultz, chairman and chief executive officer of Starbucks, said in a statement.

The Customer

Speaking to Yahoo Finance, Schultz said Starbucks is trying to capitalize on the growth of the Chinese middle class, which is estimated to grow from 300 million currently to 600 million within the next ten years.

"Over the last 10 years, I probably have been to China as much or more than any other public CEO in America. And what I've seen first hand is the significant growth and development of the middle class," Schultz said. "We're starting to develop the morning ritual in China."

What Else Is On The Horizon?

"China represents the most important and exciting opportunity ahead of us. As our first international Roastery, we will take even bolder steps to make this Shanghai location our most stunning store, while making it completely unique and relevant to the Chinese customer," Schultz said.

Moreover, China is considered to be the biggest market for Starbucks after the United States. In China, Starbucks has more than 2,100 stores across over 102 cities, including 55 Starbucks Reserve stores.

The Yahoo report added, "Starbucks will also be opening another store in China in what Schultz sees as potentially its highest grossing retail store in the world," as it will be located at the main entrance of the new Shanghai Disneyland.

According to the report on Yahoo Finance, Schultz noted that not only is Starbucks well positioned to win in China, but he also predicts the China market will one day be larger than the American market for Starbucks. It makes sense as it has more than 12,000 stores in the U.S. for a population about 300 million versus only 2,100 plus stores in China with a population of 1.34 billion.

"I believe what the Chinese government is trying to do is create economic transformation, and I think they're taking some bold moves. And I believe over the long term the government will serve its people in a way that will be consistent with Starbucks having an opportunity to grow in that market and grow successfully," he said.

At time of writing, shares of Starbucks were up 0.27 percent at $55.30.