Starbucks wins China trademark battle

By Chris Mercer

- Last updated on GMT

Related tags: Starbucks, Coffee

Starbucks, the US coffee chain, has won the trademark battle in
China that analysts said it could not afford to lose, paving the
way for the firm's Asian expansion plans.

A Shanghai court handed Starbucks victory and the right to use its namesake as a trademark in China after a two-year legal battle with local company Xingbake, which was found to have a Chinese name and logo too similar to Starbucks' own.

The ruling will help Starbucks to implement aggressive expansion plans. The group recently also won a trademark battle in Russia.

Market research firm Euromonitor​ said in 2004 that "Starbucks cannot afford to lose the lawsuit, as Shanghai is the core market for its mainland Chinese operation"​.

Starbucks recently named China, alongside India and Russia, as one of its main targets for new stores in 2006. Michael Casey, chief financial officer, said Starbucks would expand at a loss if necessary.

The firm said it wanted to open 1,500 stores, including 700 self-owned ones, across the world this year, after the addition of 735 self-owned coffee houses led it to a 23 per cent sales rise in 2005.

China, with its fast-growing economy and large population, has frequently been cited as a strong emerging market for food and drink firms - and coffee is no exception.

Coffee sales in China grew by 90 per cent between 1998 and 2003, according to Euromonitor figures, although instant varieties maintained their dominance over freshly ground coffee. A similar situation exists in Russia, where coffee sales are growing but instant still holds 90 per cent of the market.

The good news for Starbucks, which has more than 90 coffeehouses in China, is that the country's on-trade coffee sales have doubled and Euromonitor predicted coffee market volume would rise 70 per cent between 2003 and 2008.

Rising incomes, falling retail coffee prices and coffee-loving ex-pats have helped, although challenges inevitably remain - not least competition from international competitors such as instant coffee giants Nestlé and Kraft, as well as Japanese café Malabe.

Then there is, of course, the on-going battle between coffee and tea.

China has been a tea stronghold for years. It is cheap, linked to health benefits and more widely understood than coffee.

Yet coffee-chain expansion, Chinese people returning from abroad and higher incomes give coffee something to work with. Coffee consumption in Hong Kong stood at 0.8kg per person per year in 2004, above the 0.7kg world average and 0.4kg behind the UK.

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