Starbucks CEO Explains New Alibaba Partnership

Global coffee giant Starbucks Corporation SBUX said Wednesday it reached an agreement with Alibaba Group Holding Ltd BABA to "transform the customer experience" in China.

What Happened

The partnership will combine a "world-class tech company" in Alibaba with a "world class retailer" in Starbucks with three specific objectives, Starbucks CEO and President Kevin Johnson told CNBC's Jim Cramer:

• An integration of a Starbucks virtual store in every one of Alibaba's platforms that will be seen by 500 million active users.
• Starbucks will partner with Alibaba's Ele.me food delivery platform at 150 stores in Shanghai and Beijing with the intention of expanding to 2,000 stores in 30 cities before 2019.
• The creation of up to 600 "Starbucks Delivery Kitchens" in collaboration with Hema supermarkets.

Why It's Important

The agreement comes at a time when some investors are concerned with Starbucks' performance in China, highlighted by negative 2-percent same-store sales growth in the third quarter. The agreement with Alibaba will be akin to "rocket fuel for the digital flywheel in China," the executive said.

"This will be an accelerator for our business — no doubt." 

What's Next

Starbucks and Alibaba said in their joint press release they share common values of innovation and pursuit of product and service excellence. The new partnership is seen as a "significant step as both companies partner together to elevate the customer experience across China."

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