How Costa Coffee Took On Starbucks in China

When Costa Coffee opened its 100th Chinese store inside Terminal 3 of Beijing Capital International Airport—a site formerly the most profitable Starbucks location in North China—it wasn’t just marking another milestone. It was staking a clear claim in one of the most fiercely contested retail spaces in the country: premium coffee retail, head-to-head with Starbucks.

The UK’s largest coffee chain isn’t just competing with Starbucks—it planned to open 2,500 stores in China by 2018, aiming for one-third of the market. That’s aggressive. But how did a chain with just one-tenth the global footprint of Starbucks set such bold goals in a market dominated by its rival?

Why Costa Chose to Challenge Starbucks in China

China’s coffee market was primed for disruption. According to the Beijing Coffee Industry Association, domestic coffee consumption was growing at around 15% annually—more than six times the global rate of 2%. Experts estimated the market could eventually be worth 1 trillion yuan, yet yearly sales were only around 70 billion yuan. The market was on the edge of a boom, and Costa aimed to grow with it.

How Costa’s Aggressive Expansion Outpaced Expectations

Since entering China in 2008, Costa pursued a radically different approach compared to Starbucks. While Starbucks had built its presence over 12 years, Costa grew its store count to 25% of Starbucks’ 12-year total within just three years—and at 2.5 times the speed. By 2018, the company aimed to operate 2,500 stores in China, a figure representing nearly a third of the market. This rapid rollout was backed by a “press-adjacent” strategy where new Costa outlets often opened directly beside existing Starbucks locations.

Costa’s Key Advantages Over Starbucks in China

1. Local Partnerships for Faster Expansion

Unlike Starbucks, whose local partners like Mei Da, Mei Xin, and President lacked strong commercial property access, Costa teamed up with well-connected Chinese firms Hualian and Yueda. These partnerships gave Costa access to prime retail spaces in malls and supermarkets across northern China, significantly accelerating rollout while reducing per-store negotiation costs.

2. Streamlined, Localized Decision-Making

While Starbucks relied on a slower, top-down decision process from its US headquarters, Costa empowered its Chinese joint ventures with greater autonomy. This allowed quicker responses to local market conditions, all while maintaining global standards for design, training, and operations—balancing speed with consistency.

3. Differentiated Customer Experience, Not Just Coffee

Costa’s market research revealed that Chinese consumers cared less about coffee taste and more about ambiance, service, and brand experience. While Starbucks leaned into a work-friendly, utilitarian vibe, Costa designed stores to offer more “personal space,” with thoughtful details like ample power outlets and regionally tailored interior designs. Even coffee offerings varied slightly between cities like Beijing and Shanghai, reflecting local preferences rather than enforcing global uniformity.

Frequently Asked Questions

Where did Costa Coffee open its 100th store in China?

Costa Coffee opened its 100th store in Terminal 3 of Beijing Capital International Airport, a location previously held by Starbucks as its most profitable in North China.

How many Starbucks stores did Costa aim to rival in China?

By 2018, Costa aimed to open 2,500 stores in China, which would give it nearly one-third of the market and challenge Starbucks’ dominance.

What was Costa’s expansion strategy in China?

Costa used a “press-adjacent” strategy, opening stores close to Starbucks locations, and partnered with strong local firms like Hualian and Yueda for faster access to premium commercial real estate.

How did Costa differentiate itself from Starbucks in China?

Costa focused on creating distinct cafe environments and customer experiences, emphasizing design, comfort, and localized features rather than competing solely on coffee quality.

Why was the Chinese coffee market attractive to Costa?

China’s coffee consumption was growing at 15% annually, far above the global rate of 2%, with a projected market value of up to 1 trillion yuan, offering massive growth potential.

How did Costa’s decision-making differ from Starbucks’ in China?

Costa granted more decision-making power to its local Chinese partners, allowing faster adaptation to market needs, while still maintaining global operational standards.

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