Economy

Getting the right blend in China

By Lu Chang (China Daily)
Updated: 2010-12-16 10:02

Coffee giants fight

Since opening its first store in 1999 in Beijing, Starbucks has expanded to 800 stores in China and the number will increase soon to more than 1,000, according to Schultz.

However, Starbucks is not the first company to have its eyes on Yunnan. Other coffee giants, such as Nestle SA and Maxwell House, a unit of Kraft Foods Inc, have purchased coffee beans from the province for decades.

Nestle, the world's largest food company by sales, is the first international company to establish a coffee processing plant in China.

The Swiss-based instant coffee powerhouse dominates about 80 percent of China's coffee market after stepping into the market more than 20 years ago and developing the business, said Adrian Ho, head of the coffee and beverage business unit at Nestle (China) Ltd.

The Nestle experimental and demonstration farm was established in 1997, covering an area of 60 hectares and started direct large-scale procurement of Arabica coffee from local farmers from 2002.

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So far, Nestle has invested about 50 million yuan ($7.51 million) into training local farmers to improve the quality of Arabica coffee and the yields of their plantation.

The initiative helps the company build a strong relationship with the coffee bean suppliers, most of whom are local farmers.

"I think it's not easy for someone outside to come and buy coffee, despite the fact that the prices always do something and it could be that you offer a high price and someone will sell it to you," said Wouter De Smet, manager of Nestle Coffee Agriculture Service (NAS), who has been living in Pu'er city, Yunnan, for about six years.

"But as I said, the relationship with the suppliers cannot be built overnight. Our linkage with local farmers is very strong and it helps us get access to high quality beans."

Fierce competition is brewing in China. Starbucks plans to offer its first instant coffee product, Via, which the company spent 20 years developing in China, but the coffee maker has not settled on a date, as Schultz told the Wall Street Journal earlier.

"Consumers here need to develop a better understanding of the coffee culture first," he said.