INTERVIEW: Starbucks stirs its coffee right in a nation of Chinese tea-drinkers

"There was a lot of skepticism when we first came as a coffee company into a nation of tea-drinkers twelve years ago," she said. Even today, market research from Euromonitor state that on average Chinese consumers still consume less coffee than people in other parts of the world. Beijing Coffee Industry Association also marks China’s average coffee consumption at three cups a person a year, against a global average of 240 cups.

Given that the Chinese have traditionally preferred to drink tea, the odds are stacked against Starbucks in creating a coffee culture. What the brand found in its early days was that there were no Western coffee houses in China, and turned that to its advantage by offering a ‘third place’ concept that was neither work nor home where Chinese consumers could relax.

"We have been successful because Starbucks didn't try to be something we're not but true to ourselves, which is the down-to-earth and authentic American coffee house experience," she said.

Thankfully, the Chinese are "very experiential consumers who have responded to that", even if they still do not drink coffee a hundred per cent of the time. Starbucks recognises the Chinese have different taste profiles, evident in its adaptation of beverages for the local market, like its Matcha Green Tea Latte.

Brand education over the past ten years have also gotten Chinese consumers sophisticated very quickly about coffee, said Silloway. Reasons range from the internet, word of mouth as well as increased travel.

"It's very similar to what the wine industry has gone through. Ten years ago people were adding Sprite to their wine, but now it's not the case. We do a lot of coffee seminars to educate our consumers. All things combined, this have led Chinese consumers willing to explore coffee with us," she said.

An earlier collaboration between Starbucks and Yunnan province's coffee growers resulted in the introduction of the custom South of the Clouds blend in early 2009 for the China market.

Customisation and localisation does not come at all costs for the "sensible and humble" American brand, as Silloway pointed out. In 2007, Starbucks closed its store in Beijing's Forbidden City after months of controversy.

"Interfering with historical landmarks was something we didn't want to pursue as a longer-term retail strategy. We decided not to do anything in the immediate vicinity of a historical, religious or cultural icon. We want to be extremely respectful of Chinese culture," she explained.

Wary of being accused of "marring the solemnity of the Forbidden City and undermining Chinese culture" again, Starbucks has since indulged in local culture in a more light-hearted manner.

When a young Chinese couple broke up, with the heartbroken guy writing a note in a Starbucks store journal for his ex-girlfriend to give him another chance, and coincidentally the girl replied on the same journal. An unrelated customer saw the messages and snapped a photo to post it on Weibo—this became a mini movement for netizens to get the couple back together.

Real-life stories like this have organically inspired products like the peach blossom tea latte during Valentine's Day this year—for which the term 'peach blossom' has a double meaning synonymous with 'luck with the opposite sex'.

"That has sparked banter among our customers who say if you drink one, you may have better 'tao hua yun', or luck in love. That was a natural connection to drive our marketing ideas for this program," she said.

In terms of overall marketing mix, Starbucks aims to be "very, very targeted". Its stores of high visibility in high-traffic locations are the biggest advertising vehicles, and mobile marketing has played "a huge role" because it is "immediate, direct and personal".

Starbucks' new Fuzhou store has a Chinese chess (weiqi) theme with pictures of the nearby Fushan mountains built into the store murals—something that has not been replicated by competitors such as Costa Coffee, she said.

"Competition is not a bad thing," Silloway said. "You always need competitors, how else will people be able to compare you? We know what we stand for, and we were the first in China. We have a lot of aspects other cafe chains cannot offer—our true core competency in procurement and sourcing coffee beans across every spectrum".

Silloway described how Starbucks helps coffee farmers in Sumatra improve their growing practices and gain better yields on their land. The brand also has a whole host of coffee scientists and custom blenders in a central location who look at the coffee bean varietals procured globally from 20 growing regions to create roasting profiles.

"Yes, the consumer experience is really critical, but if you go upstream in the value chain, how we impact the coffee farming community comes back to us and is something no one can replicate," she said.

If a Starbucks store is the ‘third place’ for consumers, the ‘fourth place’ is clearly the digital space. The brand's digital marketing work is currently spilt between JWT (social media), Agenda (website, app development, loyalty card membership) and AdMaster (tracking and monitoring).

Its first foray into WeChat marketing where users are able to scan customised Starbucks QR codes to instantly start following Starbucks and receive exclusive offers has been said to be a clever, early adopter of the mobile platform.

Starbucks already has 700 stores in China and plans to have 1,500 by 2015. Entering the provincial capitals with strong economic growth fueling spending power, the company is still looking to increase store density in existing markets.

"We have to be mindful of how fast we grow, and grow in the right way," Silloway said. "Look at it this way: it's not like we want to open 1,500 stores, but to open one store 1,500 times."