Starbucks is Preparing Massive Expansion into China and Middle East

Starbucks CEO Brian Niccol said the company is planning a major expansion into the Middle East and China.

In a Friday interview with Bloomberg, Niccol stated that the Alshaya Group, the chain's franchise operator in the Middle East, plans to open 500 new stores in the region over the next five years. He stated that the opening of the new stores is expected to create 5,000 new jobs.

Niccol also discussed a large-scale expansion into China. He stated that the company is focused on expanding in China "because the reality is, that market is going to continue to grow for us."

"Currently, we have over 7,000 stores. "There will be many more thousands of stores in China in the future," he said.

Niccol's comments about expanding Starbucks' presence in these two markets follow the brand's losses in the Middle East last year, when it faced boycotts due to the Gaza war.

Starbucks' finance chief stated in an April earnings call that comparable store sales outside the United States fell 6% in the second quarter of 2024, owing primarily to a decline in the company's Middle East business. Starbucks announced on its website in 2023 that the Alshaya Group operated nearly 2,000 stores in the Middle East and North Africa region.

"The boycott and the whole information cycle are very unfortunate," Niccol told Bloomberg.

"Because obviously, it hurts the brand, it hurts our partners in the stores, and the thing that's really disappointing about it is, it's just not based on anything that's accurate or true, you know, we've never supported any militaries," Niccol added.

In China, the chain faces a similar uphill battle.

Luckin Coffee, Cotti Coffee, and KFC's coffee wing, KCOFFEE, have all entered the market with low-cost offerings. These chains are now competing with Starbucks for the loyalty of China's cost-conscious consumers.

Comparable store sales in Starbucks China decreased by 6% in the most recent quarter, which ended on December 29.

Niccol's Vision for Starbucks

Niccol, who took over Starbucks in September, has implemented significant changes.

In October, he stated that he wanted to rebrand Starbucks as an inviting place to hang out.

Niccol stated on the company's January 28 earnings call that Starbucks would simplify its offerings. It would also try to reduce wait times by improving its mobile ordering system and testing a new algorithm for mobile orders.

During the earnings call, Niccol and Starbucks' finance chief announced that the chain would reduce 30% of its menu items to improve service.