China may be better known for tea, but Starbucks (NASDAQ:SBUX) said this week that it plans to source coffee from China as well as continue expansion of its Chinese operations.
One might think the timing of this announcement is a little bit off. The idea that Starbucks wants to peddle more coffee to the large Chinese population is a no-brainer. But actually sourcing coffee from China might go over a little bit differently with consumers.
First and foremost, there are countries well known for their quality gourmet coffee, and I'm sorry, but I don't think China's ever been on that list. Meanwhile, you know about the recent bumps in the globalization superhighway in relation to some Chinese goods. Mattel's (NYSE:MAT) repeated recalls of toys containing unacceptable levels of lead paint is a good example, and of course nobody's forgotten about the tainted toothpaste and pet food earlier this year.
A Reuters article on Starbucks' plans pointed out that perhaps the company is trying to save on costs related to tariffs on coffee imported from other countries, although a spokeswoman in Starbucks' Chinese operations was quoted as saying the move didn't have to do with tariffs but with launching new flavors. Perhaps China has perfectly satisfactory coffee, but the culture is new to coffee in general -- it's only recently been even developing a taste for java, after all -- and recent issues most certainly bring to light the difficulties of sourcing a supply from other countries, if nothing else.
Sure, I get it. Go to any Wal-Mart (NYSE:WMT) or Target (NYSE:TGT) -- heck, go anywhere at all -- and you're probably going to be hard-pressed to find items that aren't made in China. It's no secret that doing business with low-cost Chinese suppliers has helped many American companies boost profits. However, consumers can be forgiven for feeling a little leery at the moment. Implications -- real or imagined -- that there may be a massive lack of quality control and oversight at many Chinese suppliers is a major and growing issue on some consumers' minds right now.
The Reuters article said Starbucks has been working closely with Chinese farmers and has shipped back coffee for testing here in the States, so any Chinese coffee probably wouldn't hit Starbucks' stores for a few years. That's good, because the way things are going right now, U.S. consumers might need some major reassurance that the coffee has undergone stringent quality control.
Honestly, even as a long-term Starbucks shareholder, I have to wonder whether sourcing coffee from China is the brightest strategy for a company known for premium coffee. No offense to the enterprising efforts of the Chinese people, but the "made in China" label often means "cheap and affordable." But given recent events, that "cheap and affordable" reputation has developed a negative undercurrent. It translates to some as "low quality and, in some cases, even dangerous." Last but certainly not least, Starbucks is going to have to tread carefully into this terrain if it doesn't want to become just another cheapened, commoditized brand.
Pour yourself some recent Foolishness:
- The coffee giant raised its prices recently.
- When Starbucks reported its most recent quarter, I wondered whether the coffee giant has changed.
- Starbucks was recently forbidden in the Forbidden City.
