Starbucks Confirms Delivery Service Deal with Alibaba

Starbucks Corp strikes a partnership with Alibaba to deliver its coffee in Chinese cities in a move to revive sales growth in the second largest market in which the local coffee competition is getting tighter and tougher.

In June, Starbucks flagged that it was aiming for such a deal after it reported an unexpected decline in China sales growth.  The coffee maker partly blamed the slowdown on a government crackdown on third-party delivery firms that had previously helped move orders at its cafes.

“We quickly saw that here is a world class technology company… that’s focused on retail and modern day retail,” Starbucks Chief Executive Kevin Johnson said in an interview in Shanghai.

“I consider this strategic partnership to be one that… will just be rocket fuel for Starbucks’s growth and continued expansion in China,” he stated.

The company will start the delivery services in September from 150 Starbucks stores located in major trade zones in Beijing and Shanghai.  It also plans to expand this to over 2,000 stores across 30 cities by the end of 2018, according to the joint statement issued by Starbucks and Alibaba on Thursday.

The companies will tie up across businesses within the Alibaba group, which includes the delivery platform Ele.me, supermarket chain Henna, online retailers Tmall and Taobao, and mobile-and-online payments platform Alipay.

The delivery program will leverage Ele.me’s 3 million registered riders.  The company will also establish “Starbucks Delivery Kitchens” within Hema stores and use the supermarket’s delivery system to accomplish Starbucks delivery orders.

Johnson stated that some parts of the agreement were exclusive, though others were not.  He declined to give further details.  Meanwhile, Starbucks China CEO Belinda Wong stated later that the Ele.ne tie-up was exclusive.

The partnership has been in the talks for more than a year, according to the two companies, but they did not disclose any financial details regarding the partnership.

Alibaba Group CEO Daniel Zhang stated there was a plan to set up Starbucks delivery in all Hema stores in the future, although he did not elaborate on the timeline.

China has offered Starbucks rich pickings in the past few years, attributed to the bustling café culture that has helped curb the growing saturation in the United States.  It currently has 3,400 stores in the country and aims to nearly double that figure by 2022.

However, it is currently under intense pressure from local companies such as Luckin Coffee, which has quickly expanded thanks to a supercharged growth plan based on cheap delivery, online ordering, big discounts, and premium pay for its staff.

Starbucks’ shares dropped steeply in June after the company stated that it expected slowing sales growth in China.  Last week, it said reported a 2 percent slide in quarterly same-store sales for China, a steep decline versus the 7 percent growth that was recorded a year earlier.

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