Starbucks is shifting its target from South Korea to China. The company is changing its strategy to invest more in fast-growing international markets.
Starbucks: target market shift explained
South Korea is the fifth-largest market for Starbucks. The coffee chain has over 1,500 stores across 78 cities in the country. Analysts, however, are skeptical over South Korea’s growth opportunity. South Korea’s mature and saturated market might offer little growth opportunity for Starbucks, Reuters notes.
In relation to Starbucks‘ recent shift in target market shift, an analyst at China Market Research Group, Shaun Rein, said, “South Korea … would not be a market for major growth in the coming years. It’s better for them to sell their stake use the capital and proceeds to invest in faster growth markets like China”.
In the recent years, the US company has been expanding its business globally. The company now focuses on China as the competition in its largest market, The United States, has become stiffer. Meanwhile, China shows a better prospect as its second-quarter sales report nearly doubled.
“Using the sale of its South Korean operations will equip it with more cash that it can deploy to China,” Rein added.
Accordingly, the operating profit for Starbucks Coffee Korea in January-March surged nearly three-quarters to 45.4 billion won ($39.5 million). Still, South Korea will remain as an important market for Starbucks in the future.
Through a statement, Starbucks’ group president for international and channel development, Michael Conway, said, “Part of our success in South Korea – and in many of our international markets – is due to our expertise and judgment in knowing when to rely on local partners to continue to build the business,” Reuters quotes.
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