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Business deals

Starbucks partners with Alibaba on delivery service in China

US coffee chain hopes to revive falling sales through tie-up with tech company

Starbucks and Alibaba will begin testing a delivery service in September using Alibaba’s Ele.me platform.    © Pulled from Business Wire

TOKYO -- Starbucks announced on Thursday a partnership with Alibaba Group Holding to deliver drinks and pastries through the Chinese e-commerce leader's apps and supermarkets.

The U.S.-based chain of coffee shops hopes to raise its brand profile among tech-savvy Chinese consumers and reverse a decline in sales, as it battles local coffee chains.

The two companies will do a trial run starting in September using Alibaba's Ele.me delivery service. The test marketing will take place at 150 Starbucks outlets in Beijing and Shanghai. They plan to expand the service to 2,000 shops in 30 cities by the end of the year.

They will also set up "Starbucks Delivery Kitchens" in Hema supermarkets operated by Alibaba, where shoppers will be able to order deliveries. Starbucks will also look for ways to sell through other channels in the Alibaba ecosystem, including shopping websites Tmall and Taobao, and the Alipay payments service.

"Our transformational partnership with Alibaba will reshape modern retail," said Kevin Johnson, president and CEO of Starbucks, adding that the move "represents a significant milestone in our efforts to exceed the expectations of Chinese consumers."

Coffee chains are growing rapidly in China. According to Euromonitor International, chain coffee shops in the country had $3.2 billion in sales in 2017, an increase of 240% from five years earlier.

Starbucks, which has more than 3,300 shops in China, previously dominated the premium coffee market. But its sales fell 2%, adjusted for the change in the number of stores, in the third quarter of fiscal 2018.

The competition between Starbucks and Chinese delivery startup Luckin Coffee has been especially intense. Founded in October 2017, the Beijing-based company has already sold more than 5 million cups of coffee through its 660 distribution points.

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