Starbucks vs Costa: How They Battle in China’s Coffee Chain Market

In China, where coffee consumption is growing fast but still far below global averages, two global coffee giants—Starbucks and Costa—are locked in a fierce contest for market share. With an estimated potential annual coffee expenditure of 1 trillion yuan but current sales of just 70 billion yuan, both brands see huge opportunities. But how exactly are they competing, and what does that mean for consumers?

The short answer: Costa aims to claim one-third of China’s projected 2,500 coffee chain stores by 2018, while Starbucks focuses on controlling its supply chain and improving in-store experience. Both follow each other’s store locations closely—often opening right next door.

Two Chains, Two Coffee Cultures

Costa represents British-style coffee, while Starbucks is the face of American coffee culture. Starbucks entered Europe early, opening its first UK shop on King’s Road, London, in 1998, initially outpacing Costa. But by 2009, Costa had overtaken Starbucks to become the largest coffee chain in the UK.

In China, the race has been different. On July 2, 2011, Costa opened its 100th store in Beijing’s Terminal 3 at Capital International Airport. Andy Harrison, CEO of Costa parent Whitbread Group, attended the event and announced plans to open over 100 more stores in China in 2012. Paul Smith, Costa’s Asia president, predicted the Chinese coffee chain market would grow to 2,500 stores by 2018—with Costa aiming for one-third of that.

Store Wars: Location as Strategy

Costa has pursued an aggressive “store next door” strategy. In mature markets like Beijing and Shanghai, it’s common to see a Costa café right beside a Starbucks. Industry observers note that this tactic mirrors the long-standing competition between McDonald’s and KFC. Although Starbucks had a seven-year head start in China, having arrived in 1999 compared to Costa’s 2006 launch, Costa has rapidly expanded and poses a real challenge.

In Shenyang, for example, Costa opened two outlets in 2011: one at Joy City on April 28, and another at Plaza 66 on December 9. By that time, Starbucks already had seven stores in the city. While Starbucks remains dominant locally, Costa’s expansion can’t be ignored. Costa’s store manager in Shenyang, Liu Xianbin, acknowledged that coffee culture in the region is still underdeveloped, with misconceptions about health effects, but sees strong growth potential.

Product Differences and Consumer Preferences

For many coffee drinkers, taste is the deciding factor. One informed customer noted that Costa uses a lighter roast, resulting in a milder, more nuanced cup, whereas Starbucks employs a darker roast, yielding a bolder, sweeter, and heavier-bodied coffee. That said, even Starbucks’ stronger taste hasn’t shielded it from price increases that have diminished its value appeal.

Despite the price hikes, Starbucks maintains that it will focus less on price competition and more on environment and service. “Many customers come for the ambiance,” a Starbucks spokesperson stated, pointing to the company’s investment in creating inviting spaces. The company also began investing in its own coffee farms back in 2010 to secure supply chain stability and control over raw materials—a strategic move to support long-term growth.

Frequently Asked Questions

Which came first in China, Starbucks or Costa?

Starbucks arrived in China in 1999, while Costa entered in 2006—seven years later. Despite the later start, Costa quickly grew and by 2011 had opened its 100th store in Beijing.

How many coffee chain stores does Costa want in China by 2018?

Costa’s Asia president stated that by 2018, the Chinese coffee chain market could have around 2,500 stores, and Costa aimed to control one-third of that total—approximately 833 stores.

What’s the main difference between Costa and Starbucks coffee?

Costa uses a lighter roast, producing a milder and more balanced flavor, while Starbucks uses a darker roast, resulting in a bolder, sweeter, and heavier cup. Many consumers notice this difference in taste.

Why does Costa open stores so close to Starbucks?

Costa employs a “store next door” strategy, especially in cities like Beijing and Shanghai, to directly compete for foot traffic and visibility, similar to the rivalry between McDonald’s and KFC.

How is Starbucks responding to competition from Costa?

Besides expanding its store count, Starbucks is focusing on improving in-store environments and services. It also invested in coffee farms starting in 2010 to secure its supply chain and control over coffee quality.

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