The company is opening new outlets across China as fast as it can, but so far its two joint ventures with local partners are not making a profit. Paul Smith, who runs their operations in Asia, says Costa Coffee is in China “because we are committed to a global expansion of our business”.

“If you come here to make money in China you have to remember it will take you some time to do so,” he says. “It’s a country that you need to invest in in many ways. That’s not just money, that’s people, that’s resources, and you have to understand you need to be necessarily patient in China in every aspect.”

Companies like Costa Coffee are betting that tomorrow’s prospects will be rich enough to compensate for the lack of profits today.

But it is right to characterise this as a gamble, and fair to say that some here are starting to complain the odds are stacked against them.

I don’t think Costa has any branches in Wuhan, but I visited one of their cafes in Hangzhou when I was on the hunt for wifi and couldn’t find a Starbucks. I remember it being incredibly expensive — even more expensive than Starbucks, which already feels like it must be targeting the upper crust of China’s consumers. (Also, no wifi, apparently that’s an explicit choice to maintain the right mood in their cafes). But presumably Costa has crunched the numbers and decided that the luxury market is the place to be — and that it’s going to be so important that it’s worth losing lots of money in the short term in order to get a foothold in the market before it’s too late.

A lot of foreign brands have made this gamble (it would be interesting to know which foreign brands are actually making money in China, and how long it took them to get there). As far as cafes go, Starbucks seems to be winning the race hands down — they seem to be essentially creating a modern cafe culture in major Chinese cities where it didn’t exist before (much in the way they take credit for creating a cafe culture in the US), and even though a Starbucks frappuccino is incredibly expensive relative to the cost of living in Chinese cities, almost every Starbucks I’ve been to in China has been buzzing. At the one closest to Wuhan University, it was usually so busy that it was hard to find a seat on weekends.

It must be daunting to try to compete with the brand that’s essentially creating the market. But presumably Costa is hoping that once Chinese consumers have started to fall in love with Starbucks coffee, they’ll branch out to other brands, and at that point Costa will be ready. And maybe it does make sense to come in once someone else has done the groundwork — there are a lot of knock-off cafes in China that are obviously copying Starbucks’ brand, and I’ve read that rather than going after them for IP infringement, they’ve found it easier to let the knock-off cafes do the groundwork and then to step in and buy them out when the time is right — so even Starbucks appreciates having someone else break in the market before they step in and take over.

Seen through the glass wall of a Starbucks in Kowloon, Hong Kong

Starbucks mooncakes

I read an interesting blogpost that described the informal “mooncake exchange” that springs up every year in Shanghai in the weeks leading up to the holiday. Many employees apparently receive mooncake vouchers from their companies, which brokers then offer to buy at discounted prices, and in turn sell on to others who would like to give mooncakes as gifts but don’t want to pay the ridiculous prices that the major brands charge. The broker might buy the vouchers for 50% of their face value and then sell them on for 70% of the face value, for example, and the buy and sell prices probably fluctuate as the holiday approaches, after which the mooncakes lose their gift value.

Mooncake prices in themselves are an interesting phenomenon. Here in Wuhan, the cheapest cost just a few yuan, or are sold by weight at 9 or 12 yuan a 斤 (jin, equivalent to 500 g). The most  expensive, fancy boxes of four or five mooncakes from famous brands, can easily cost several hundred yuan per box (I believe the Starbucks mooncake set, with four small mooncakes, costs 328 yuan — the picture on the right is from their website). Some of the price difference might be justified by better quality and taste, but most of the price is supported by the fact that everyone knows the cost of mooncakes from the major brands and the gift is valued accordingly.

And as for the taste? Maybe not worth Starbucks prices, but the “Sushi” flavored mooncakes my boyfriend got from his co-teacher were actually surprisingly good, and without even a hint of fish (Sushi was probably the bakery’s attempt to write 苏式 in English, which in this case I assume would mean Suzhou style, or possible Su family style). Definitely a tradition worth keeping.

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