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Found this on the "Motley Fool" investing website today:
Starbucks Forbidden in the Forbidden City
By Alyce Lomax July 17, 2007
It's easy to joke about Starbucks' (Nasdaq: SBUX) aims for ubiquity. A
Starbucks on the moon? A Starbucks at the North Pole? A Starbucks within a
Starbucks within a Starbucks, like those Russian nesting dolls?
But recent news from China illustrates that Starbucks isn't welcome anywhere
After seven years, Starbucks is closing its store located smack dab in the
middle of China's ancient Forbidden City. A former imperial complex that
UNESCO declared a World Heritage Site in 1987, the logic behind Starbucks'
desire to be there makes perfect business sense. After all, it's an
important Chinese site and tourist destination, with somewhere between 7
million and 9 million tourists each year.
But it's understandable if the Chinese are feeling sensitive about the
matter. The City was built in 1420 and housed 24 Chinese emperors until 1911
(it became a museum in 1925). Its name refers to the tradition that it was
closed to the public and foreigners who didn't have special permission to
enter. It already survived a very well-known period in China -- the infamous
Cultural Revolution -- and that was no easy task, since it couldn't be more
symbolic of the old imperial ways. It doesn't seem hard to fathom that the
Chinese might feel sensitive about modern Western logos and brands at a
location that has endured so many centuries and so much change, and thereby
speaks to national identity.
I wouldn't go so far as to say that this means the Chinese people will be
particularly adverse to Starbucks in general, although maybe we investors
shouldn't underestimate the potential for difficulties. Companies as
formidable as eBay (Nasdaq: EBAY) have had a hard time breaking in there.
I've run across a few articles that imply that while increased Chinese
affluence has increased demand for Western brands, there's some
nationalistic backlash, too. Starbucks' presence in the Forbidden City was
the poster child for the situation, since some citizens protested and
petitioned the store.
This doesn't even really touch on the political elements. Both Google
(Nasdaq: GOOG) and Yahoo! (Nasdaq: YHOO) have had their share of
difficulties operating in China, given the government's demands on their
businesses. And of course, recent U.S. demands on the quality of Chinese
goods is causing some tension as well.
Starbucks has chosen to close its doors in the Forbidden City, since staying
in operation would require dropping its name. (It had already removed its
sign from the premises, but the ubiquitous cups with the Starbucks logo
betrayed its presence within the site.) And you know darn well that
Starbucks wouldn't stand for operating a cafe that doesn't have its
all-important brand name attached. Starbucks has its own culture to think
I think it would be premature to get rattled about Starbucks' plans in
China, especially at a tourist site that wishes to remain non-commercialized
(particularly by companies that are symbolic of Western culture). Still, it
doesn't hurt for us to be mindful that Starbucks and other American
companies may have to tread very carefully into this ancient culture.
Starbucks, Yahoo!, and eBay are Motley Fool Stock Advisor recommendations.
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Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy --
non-disclosure is strictly forbidden.