US coffee retailer Starbucks has signed a joint venture in China to manufacture and distribute ready-to-drink beverages in the grocery channel.
Starbucks China chose listed Chinese drinks company Tingyi Holding Corp, which trades as Master Kong, to make and sell the drinks in supermarkets and convenience stores.
Starbucks will be responsible for providing coffee expertise, brand development and future product innovation, and Tingyi will manufacture and sell Starbucks RTD portfolio in China.
China is already Starbucks’ fastest growing market worldwide with the chain already operating more than 1500 cafes in 90 cities. Now it wants to use its brand strength to gain its share of the coffee-on-the-go and home-consumption markets.
The RTD coffee and energy category is a $6 billion business, and is projected to grow by 20% over the next three years, according to Euromonitor data.
In a statement, Starbucks said the agreement leverages the respective strengths of Starbucks and Tingyi to bring the entire Starbucks RTD portfolio to customers in China as well as the ability to innovate specifically for the China market.
Tingyi is a leading Chinese food and beverage producer which, after more than 20 years of development, boasts world-leading production facilities and management expertise with a broad spectrum of quality channel resources. Tingyi’s local manufacturing, sales and distribution expertise combined with Starbucks strong brand recognition and coffee expertise will unlock new market opportunities.
“We are pleased to work with Tingyi, a leader in China’s RTD beverage category, to unlock the massive ready-to-drink market and grow local demand for Starbucks,” said John Culver, group president, Starbucks Coffee China and Asia Pacific, channel development and emerging brands.
“Our agreement enables us to develop new categories and occasions to delight our customers and connect people outside of our stores to Starbucks where they live, work and play.”
James Wei, CEO of Tingyi Holding Corp, said the China RTD market has a huge growth potential.
“The agreement with Starbucks will further expand Tingyi’s beverage product portfolio and enables us to provide consumers with more high-quality and convenient product options and experiences. As part of this cooperation, Tingyi will leverage its strength in production and distribution to increase the market share of Starbucks’ RTD products in the Chinese market.”
Today, customers in China can purchase Starbucks Bottled Frappuccino beverages in nearly 6000 locations including select Starbucks retail stores, grocery and convenience stores throughout mainland China. Through this agreement, Starbucks and Tingyi plan to bring new and existing Starbucks Bottled Frappuccino in the marketplace during 2016, which will be followed by innovation and an increased number of locations and cities for consumers to purchase Starbucks RTD products.
