Internet + Coffee: Starbucks-Alibaba marriage comes amid China-US trade dispute

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02:49

As China-US trade tensions rise, US coffee giant Starbucks has made a high-profile announcement of a partnership with China's e-commerce giant Alibaba. Part of the deal is that Alibaba will build a fast delivery network for Starbucks in China. CGTN's Han Peng reports.

Starbucks opens a new store in China every 12 hours.

HAN PENG SHANGHAI "For me, I take one cup of coffee every 24 hours. My parents wouldn't say it's a good habit, but for more and more Chinese of my age, coffee has become a lifestyle."

Starbucks entered China nearly 20 years ago when few people drank coffee. It lost money for nine years, but the founder of Starbucks decided to stay on.

HOWARD SCHULTZ FOUNDER OF STARBUCKS "I was one of the early CEOs in America saying how bullish and excited I was about the Chinese opportunity for Starbucks and the China market. We understood that there was a place in between home and work, which is the third place."

The result, China has now become Starbucks' second largest market after the United States. But it is facing challenges head-on from local brands.

Take this one for example, Luckin coffee, an eight-month-old local brand which promises to deliver coffee half the price of Starbucks to your home or office within 30 minutes, with a delivery fee of less than one US dollar.

That's part of the reason Starbucks decided to partner with China's e-commerce giant Alibaba. Alibaba has a nationwide food delivery platform Ele.me. It will deliver coffee for Starbucks in 30 Chinese cities. We met up with CEOs of the two companies.

KEVIN JOHNSON CEO OF STARBUCKS "Today's announcement is really a reflection of the fact that Alibaba is a world-class technology company. They have a shared vision around the future of retail and how you bring the offline experience with the digital experience together to create a new customer experience."

The two companies will also set up "Starbucks delivery kitchens" in some of Alibaba's newly opened physical stores, the first time the US company will brew coffee outside its own shops.

DANIEL ZHANG YONG CEO OF ALIBABA "We started from the virtual world, and Starbucks started from the real footprint on the ground. But now we are together."

HAN PENG SHANGHAI "Any concerns about the trade war?"

KEVIN JOHNSON CEO OF STARBUCKS "We are focused on our business, and on the things that we can do."

Despite the challenges and uncertainties, Starbucks continues to invest in China. It opened its world's biggest store in downtown Shanghai, and the second biggest in Beijing, over the past year. Simply put, this US brand has shaped a Chinese lifestyle, and now, it cannot afford to lose in China. Han Peng, CGTN, Shanghai.