Starbucks to build up roasting capacity in China

Starbucks China announced on March 13 it will invest about $130 million in China to open a roasting facility in 2022, part of its new Coffee Innovation Park to further strengthen the company's coffee supply in Asia.

The project is set to handle Starbucks' largest roasting capacity outside of the United States, including a roasting plant, warehouse and distribution center, as a key component of the company's global roasting network.

Currently, Starbucks operates six other roasting facilities — one in Amsterdam to support European markets, and five in the US.

"The Supply Innovation Park will set a blueprint for the future of coffee roasting and supply chain, and propel China's coffee industry to a whole new altitude, while opening Starbucks' next growth chapter in China, with China," said Belinda Wong, chairman and chief executive officer of Starbucks China.

"The current battle against the coronavirus outbreak may have presented temporary challenges, but Starbucks' confidence in China is unwavering and our commitment to the market has never been stronger."

The investment highlights the company's ambition to further globalize its roasting network and reinforces Starbucks strategic focus on the United States and China as its two lead growth markets, the company said.

"The bold infrastructure investment further deepens Starbucks' multi-decade commitment to strengthen the specialty coffee industry in China, where it aims to have 6,000 stores by 2022," according to a statement.

"The investment reflects the long-term ambition of Starbucks of developing the coffee market in China and their confidence in the future prospects of China's market. Having the roasting factory in China may help them supply China and the rest of Asia more efficiently," said Jason Yu, general manager of Kantar Worldpanel China. Starbucks said the roasting factory will serve the company's current and future needs in the country while allowing for export.

"Per-capita consumption of coffee in China is still lagging behind Western countries, therefore building an entire ecosystem including factories will help with long term strategic market development for Starbucks."

Zhu Danpeng, a food and beverage analyst, said the move reflects the recognition and reposition of Starbucks in the Chinese market, and the "intelligent" and locally manufactured factory will improve popularity and loyalty among consumers in the country.

The company has cultivated a farm-to-cup special coffee industry in China through continued investment in training and infrastructure, which includes the opening of the Starbucks Yunnan Farmer Support Center in 2012 to manufacture local coffee beans.

The new roasting facility, wholly owned and operated by Starbucks, will source coffee from China and around the world directly from origin for processing, roasting, packaging and distribution.

Construction of the project – covering a four-hectare site -- will begin later this year in the city of Kunshan, an hour's drive from Shanghai.

Beyond roasting, once in operation, the park will integrate green coffee bean warehouse management and processing, with plans to co-locate a highly automated and "intelligent" distribution center that will become the heart of the Starbucks distribution network in China.

The facility also will serve as a training ground for coffee roasters and key roles across the Starbucks coffee supply chain in the country.