Starbucks partners with Alibaba to expand coffee delivery in China

In an alliance between giants, Starbucks and Alibaba, China’s largest e-commerce operator, are looking to transform coffee consumption in a nation once known for tea.

“Starbucks is growing and innovating faster in China than anywhere else in the world,” said Starbucks CEO Kevin Johnson. “Our transformational partnership with Alibaba will reshape modern retail and represents a significant milestone in our efforts to exceed the expectations of Chinese consumers.”

Starbucks has agreed to allow Alibaba’s delivery service, Ele.me, to distribute coffee starting in Beijing and Shanghai. It plans to expand to over 30 cities and over 2,000 stores by 2018.

The service will let customers order through an app and receive their coffee without going to a store.

Starbuck will also collaborate with another Alibaba division, Hema supermarket, to put a Starbucks Delivery Kitchen in the store. This new component is only available in selected Hema locations around Shanghai and Hangzhou.

In addition to a new physical location, Starbucks and Alibaba will co-develop co-develop a virtual store designed to enhance the consumer experience by making it more personalized.

“Starbucks has recently indicated that some of their weakness in the China business is due to a change in the delivery environment,” said Peter Saleh, managing director and senior restaurant analyst for BTIG, a financial services firm. “And that they [Starbucks] need to become more aggressive on delivery with a third-party partner.”

The coffee giant will also be working with other Alibaba branches like Tmall, Taobao and Alipay.