Starbucks Invests $15 B in Coffee Manufacturing Unit in China

starbucks investing 15B in coffe manufacturing unit in China

Despite a significant economic recession, Starbucks claims to have invested more than $200 million in a new campus in China, demonstrating the importance of the Chinese market to the multinational coffee brand.

The huge plant in eastern China that will act as the beverage industry giant’s primary production and distribution center for the entire country opened its doors on Tuesday, bringing fresh coffee to thousands of Chinese outlets. The location has a sizable coffee roasting plant as well as a spot where guests can witness how drinks are created.

Starbucks (SBUX) claims to have invested a staggering 1.5 billion yuan, or roughly $220 million, in the project, making this the company’s largest investment in a coffee manufacturing and distribution facility outside of the United States.

That’s about 50% more than the $150 million it had initially committed to spending in 2020, which was already more than the $130 million that had been disclosed earlier in the year.

“Innovation Park”

After a year of delay, the 80,000 square foot (7,400 square meters) “innovation park,” which is situated in the city of Kunshan, approximately an hour from Shanghai, has finally opened.

The factory would be “operational in summer 2022,” according to an earlier statement from Starbucks, which was made in November 2020 while China struggled with upsetting pandemic-related regulations. When asked Tuesday why the delay occurred, the corporation did not react right away.

China has long been one of Starbucks’ most significant development engines, acting as both its second-largest global market and top export market.

However, the company is “still in our early days in China,” according to CEO Laxman Narasimhan, who also points out that the country has traditionally been a coffee-drinking one.

In a call with investors last month, he mentioned how revenue in China had increased earlier this year after Covid-19 restrictions had hurt the company’s sales there last year. 

China’s Economy

The impacts of a property industry in crisis and shaky consumer confidence are expected to harm China’s economic development this year. However, fresh statistics released on Friday seemed to indicate that the dip was leveling off.

“I couldn’t be prouder of the China team’s visionary thinking,” CEO, Laxman Narasimhan added. “As Starbucks’ largest and fastest-growing international market, we will continue to deepen our investment and reinforce our unwavering long-term commitment to the China market.”