Starbucks vs. COSTA: The High-Stakes Coffee War in China

In January 1999, Starbucks opened its first mainland China store in Beijing’s China World Trade Center — a symbol of Western luxury and café culture. But last month’s confirmation of its closure shocked regulars. For many, Starbucks wasn’t just a café, it was a daily ritual, even a status symbol. So why would the global giant walk away from its own pioneering location?

The short answer: rising rent. Reports cite monthly costs exceeding ¥1,000 per square meter — nearly double nearby China World Trade Center Phase III — pushing the iconic store beyond profitability. Even premium paper cups and thinner napkins signal tighter margins.

How COSTA Took Advantage of Starbucks’ Struggles

While Starbucks scaled back, UK-based Costa Coffee saw opportunity. By 2011, it had already become China’s fastest-expanding coffee chain — and it did so by shadowing Starbucks’ store locations almost store-for-store. Its strategy? Open near, or even in place of, Starbucks outlets, often ignoring conventional cost limits.

One bold move: securing Beijing Capital Airport T3 Terminal’s former Starbucks site. Media reports revealed COSTA’s monthly rent there hit ¥600,000 — 4 to 5 times a typical mall shop — excluding fees to the airport operator. That’s not just competitive pricing. That’s aggressive occupation.

Why Premium Locations Cost So Much — And Why Brands Pay

At China World Trade Center Phase I, prime CBD real estate commands top dollar. The financial burden isn’t unique to Starbucks: high-traffic urban locations come with premium price tags, especially in capital cities. For corporations, individual stores serve as both profit centers and physical branding tools.

COSTA’s parent company, Whitbread Group, made a strategic bet. In 2011, its then-CEO flew to Beijing just to open COSTA’s 100th store at that same T3 terminal — a location Starbucks had formerly dominated. It was more than expansion. It was a statement.

What Really Drives These Coffee Giants — Beyond the Café

Despite the café experience, companies like Starbucks and COSTA function more as global trade and retail entities than simple coffee shops. Their business includes upstream investments in coffee farming, global supply chains, in-store retail, branded merchandise, and even supermarket distribution.

“For these groups, individual stores are just showcases,” says Wang Dongsheng, founder of Food Fashion International. “The real capital flows through longer, deeper supply and retail networks.” That means temporary setbacks — like losing a flagship store — are calculated risks in a much larger commercial ecosystem.

Frequently Asked Questions

Why did Starbucks close its China World Trade Center store?

The store closed largely due to skyrocketing rent, reportedly over ¥1,000 per square meter monthly — almost double that of adjacent properties. Even for a global brand, such costs made the location unsustainable despite its symbolic and historical importance.

How did COSTA manage to open at the T3 Terminal location?

COSTA secured the former Starbucks spot at Beijing Capital Airport T3 Terminal, reportedly paying ¥600,000 per month in rent — 4 to 5 times the norm for a standard mall store and excluding airport management fees. It was a bold, high-cost move to directly challenge Starbucks.

Is COSTA expanding faster than Starbucks in China?

Yes. Since entering China in 2007, COSTA has grown more rapidly than Starbucks, strategically opening stores near or in the same locations as its rival, often without regard to higher rental costs.

Do rent prices really affect coffee chains this much?

Absolutely. High-profile locations in prime urban districts command premium rents that can exceed what even global brands can justify long-term — as the Starbucks China World closure demonstrated.

Are coffee shops like Starbucks and COSTA really just cafes?

Not entirely. They function more as global retail and logistics businesses, involved in coffee sourcing, supply chains, branded products, and distribution — with cafés serving as visible brand touchpoints within larger commercial strategies.

Recommended FrontStreet Beans for Urban Coffee Shops

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