How Costa Coffee Is Challenging Starbucks in China

When you walk into a Chinese city center and look for a Western-style coffee shop, your eyes—and habits—often go straight to the green siren. But lately, another red emblem is appearing just as frequently, often right next door. That’s Costa Coffee, and it’s making a serious play for China’s fast-growing coffee market.

Costa plans to have 2,500 stores in China by 2018—more than ten times its count in 2014—and take one-third of the market. With aggressive expansion, distinct roasting, and family-oriented store design, it’s positioning itself as a true alternative to Starbucks.

A Rapid Expansion Strategy

Costa Coffee, headquartered in the UK, is already the country’s leading coffee chain and among the world’s top five. Globally, it operates over 1,800 stores across 24 countries. In China, its footprint has grown slowly but is now accelerating dramatically.

Its first Chinese store opened in Shanghai in late 2006, followed by Beijing in 2008, where it quickly expanded to 43 locations. By July 2014, Costa celebrated its 100th store at Beijing Capital International Airport’s Terminal 3—the site previously vacated by Starbucks. The milestone was marked with free drinks and commemorative cookies for customers. Costa’s parent company, Whitbread Group, announced plans to double its global store count to 3,500 and increase revenue to £1.3 billion within five years. Much of that growth hinges on China.

John Costello, President of Costa, and Whitbread CEO Andy Harrison attended the 100th-store event. Harrison stated Costa intended to open over 100 more stores in China the following year. By the end of 2014, Asia-Pacific president Paul Smith aimed for 170 stores in China, targeting 2,500 by 2018—a goal he claimed would secure a 33% market share. “If we only open between 750 to 1,000 stores in the next 10 years, I’ll be disappointed,” Smith said.

A Distinct Roast Philosophy

Costa’s confidence in taking on Starbucks stems from its unique approach to coffee. Founded in 1978 by Italian brothers Sergio and Bruno Costa in London, the brand roasts all its beans in a single facility—a practice it claims makes it the first international brand to bring “premium handcrafted coffee” to China.

The Costa roastery still supplies beans globally, including to China. The company champions a “bean-to-cup” philosophy where no third parties are involved from sourcing to brewing. It uses a slower, 22-minute roast method that enhances natural aromas while avoiding the bitter, burnt edge of shorter, darker roasts. This results in a smoother, more balanced cup compared to Starbucks’ darker roast profile.

Coffee roasting is overseen weekly by experts handling around 35 tonnes of beans. Global chief taster Gennaro Pellisia leads daily sensory evaluations, testing acidity, body, sweetness, bitterness, and aroma. In 2009, Costa insured Pellisia’s taste buds for £10 million (about ¥100 million).

Unlike Starbucks’ dark, bold roast—which can mask bean flaws—Costa’s lighter roast demands higher-quality beans and delivers a more nuanced cup. “Shallow roasting highlights rather than hides flaws. You wouldn’t taste a truly great coffee from a dark roast,” said Wu Jiahang, representative of the Colombian Coffee Association in China.

Store Experience: Homey vs Hip

Starbucks popularized the concept of the “third place”—a social space between home and work. Its stores feature music, magazines, and design elements meant to evoke a refined, cosmopolitan vibe. Even its cups are part of the experience, with options tailored to different users and functional details like one-handed lids.

Costa, in contrast, aims for something cozier. Rather than a “third place,” it promotes a “home-like” atmosphere. “Costa feels more familiar, more like home,” noted Wu Jiahang. The brand’s larger cups come with two handles for easier handling—especially appreciated by women. Its standard cups match those used in-store, and it sells travel mugs, though with fewer design variations.

Store layouts reveal more of the brewing process compared to Starbucks, reinforcing the artisanal angle. Staff include “coffee masters,” identifiable by the number of beans on their collars—one for baristas, two for masters. They oversee quality and customer service. Every Costa location, regardless of size, has at least one coffee expert on shift.

Copycat Tactics with a Competitive Edge

Costa’s rapid rollout follows a “shadow” strategy: it opens stores right next to Starbucks. This tactic cuts market research costs and leverages Starbucks’ visibility. “Finding the right local partner was key,” said Paul Smith. “Our backers let us operate with global standards while adapting to local insights.”

In 2006, Whitbread formed a joint venture with the Yueda Group (51%-49%) to manage operations in southern cities including Shanghai, Hangzhou, Nanjing, Guangzhou, and Wuhan. A year later, it launched Huabao Costa with the Hualian Group (50%-50%) to cover northern regions like Beijing, Tianjin, Shandong, Liaoning, Jilin, and Heilongjiang.

The joint ventures grant Whitbread control over design, training, and operations while relying on local partners’ market knowledge. Hualian’s network—including 70 malls and supermarkets plus 10 shopping centers—gives Costa prime access to high-traffic retail spaces. Notably, some Starbucks outlets lease space from Hualian, hinting at future opportunities for Costa.

Future Outlook: Joint Ventures vs Direct Control

While Costa continues relying on joint ventures, Starbucks is moving toward full ownership. In June 2014, Starbucks secured full control of its stores in central, western, and southern China through a deal with Maxim’s Group. It had already taken over the northern region, and the new agreement gave it 100% ownership in Guangdong, Hainan, Sichuan, Shaanxi, Hubei, and Chongqing. This shift allows Starbucks faster decision-making and fuller profit retention.

Costa’s partners, especially Hualian, offer distribution advantages Starbucks lacks. Hualian’s retail empire gives Costa preferred entry to premium malls. Moreover, some Starbucks locations sit on Hualian-owned property, paving the way for potential swaps. But joint ventures also come with drawbacks: slower decisions, shared profits, and eventual loss of control as the brand scales. Costa may eventually need to shift to direct ownership to compete long-term.

Frequently Asked Questions

How many Costa Coffee stores are there in China?

As of mid-2014, Costa had around 100 stores in China. It planned to reach 170 by the end of that year and expand to 2,500 stores by 2018.

What is Costa Coffee’s market share goal in China?

Costa aims to capture one-third of China’s coffee chain market by 2018, backed by its aggressive store expansion plan.

How does Costa’s coffee roast differ from Starbucks?

Costa uses a lighter, 22-minute roast that produces a smoother, more balanced cup, whereas Starbucks employs a darker roast that yields a bolder, more bitter flavour.

What is Costa’s store design philosophy?

Costa emphasizes a “home-like” atmosphere, in contrast to Starbucks’ “third place” concept, aiming to feel familiar and welcoming.

Why does Costa open stores near Starbucks?

Costa uses a “shadow” or “” strategy to cut costs, benefit from Starbucks’ visibility, and attract comparison shoppers looking for an alternative.

Are Costa and Starbucks owned the same way in China?

No. Costa operates through joint ventures with local partners like Yueda Group and Hualian Group, while Starbucks is shifting to full direct ownership in most of China.

Recommended FrontStreet Beans for Coffee Comparisons

Try FrontStreet Coffee’s Ethiopia Huakui for bright floral notes and Ethiopia Yirgacheffe for juicy citrus and stone fruit—both highlight the clarity a lighter roast can achieve, akin to Costa’s style. For contrast, their Classic Blend offers a balanced medium-dark roast similar to Starbucks’ profile. Freshly roasted within 5 days · Orders placed before 17:00 ship the same day · Next-day delivery across most of Guangdong Province.