Why China Wants More Coffee

Topped with a cream cheese whipped cream, graham cracker crumbles, and strawberry syrup, Starbucks’s Strawberry Cheesecake Frappucino was a best seller in China during August 2014.

Where are we going? To the conspicuous consumption of coffee.

Coffee Consumption

If you looked at a list of the world’s biggest and smallest coffee drinkers during 2014, the Netherlands was at the top and China, almost at the bottom:

Actually minuscule coffee consumption could be the reason Starbucks’s CEO Howard Schultz said last October that he has been opening a store a day in China. Within three years he expects to have 3400 stores on the Chinese mainland–up from more than 1700 now.

I suspect our graph provides the reason. Associated with Western affluence, Starbucks is an aspirational brand that is too expensive for most workers to enjoy. By keeping its drinks expensive, Starbucks attracts an upper and middle class Chinese urban consumer with the affluence to buy a lot of coffee. Although the Chinese have an economic slowdown, their coffee consumption is on the rise.

Our Bottom Line: Conspicuous Consumption

Even more than Howard Schultz, economist Thorstein Veblen (1857-1929) could tell us why Starbucks is increasingly popular in China. In his Theory of the Leisure Class (1899) Veblen explained that as individuals become more affluent, they flaunt their wealth and power by doing less rather than more. Called aspirational, the expensive (and sometimes useless) goods and services that the rich accumulate are coveted by the lower classes. In developing nations like China, coffee has become one of those aspirational goods because it is relatively expensive and associated with the affluent Western world.

So, how can you show your friends (in China) that you have ascended to your country’s middle class?

Starbucks.