If Starbucks enters a third-tier city

If you have McDonald's in your city or town, you will have a sign of a modern and international life. It also means that the disposable income of residents in your city or town has reached a certain level and can afford to buy McDonald's. This is what we all know as a well-off society-the modern emerging middle class, which means that in addition to basic daily expenses, there is still a small surplus to buy other products. By investigating the retail market and analyzing the new economic growth in the hinterland, Mintel found that the development of McDonald's (and KFC) partly reflects the increase in income and ambition of Chinese residents.

McDonald's and KFC can be seen everywhere. Instead of talking too much about a well-off society, we now focus on the emerging middle class, which means the further development of consumer income, spending and ideals. And I think Starbucks is now a new symbol of the development of third-and fourth-tier cities. Of course they will expand aggressively-their chain stores are expected to expand to more than 1500 in 70 Chinese cities by 2015. And the fastest growing cities are second -, third-and fourth-tier cities, grabbing the renminbi in the pockets of the emerging middle class.

Starbucks may be struggling in some international markets, but it is plain sailing in China. Overall, coffee shops are growing rapidly across China-the market value is currently 3 billion yuan, according to Mintel, and is expected to grow to about 5 billion yuan in 2015. Crucially, Starbucks earns more money per cup in China than in most other major markets, and China is the company's cash cow. And now if a town has a Starbucks opening, it marks that the town has entered a well-off society.

As the saying goes, a piece of rat shit breaks a pot of soup (or a cup of latte). But the highly profitable coffee has not made Starbucks comfortable in China-rising rents, labor costs, raw material costs, taxes and inflation are all putting pressure on Starbucks, as the vast majority of Chinese consumers still choose to spend in stores rather than takeout services that are more profitable for merchants. Starbucks lags far behind Western markets in this respect, so it is necessary for Starbucks to adjust its menu for the sake of China's fat meat.

There are also plenty of competitors-- Costa Coffee, Coffee Bean, Tea Leaf, Blue Mountain, Lavazza, Dunkin' Donuts, McDonald's, and many small local chains and independent merchants-- all hoping to grab market share quickly.

But Starbucks still has a market advantage-a symbol of internationalization and globalisation; it is also a sign that China's emerging middle class wants to show off. With the growth of China's second -, third-and fourth-tier cities and towns, if Starbucks operates in these towns, it means that these cities and towns have entered an international well-off society.