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Originally published Friday, November 12, 2010 at 10:01 PM

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Starbucks plans coffee-processing plant in China

Starbucks, the world's biggest coffee chain, will set up a farm and processing facilities in China's southern Yunnan ...

Starbucks will set up a farm and coffee-processing facilities in China's southern Yunnan province, from which its coffee purchases have grown 20-fold in three years.

The facilities will be built in Pu'er county, where the namesake tea is grown, Starbucks said in a statement Friday. It will also establish a farmers' support center, its first in Asia and third globally, after Costa Rica and Rwanda.

China will eventually be Starbucks' biggest market, Chief Executive Officer Howard Schultz said at a briefing in Yunnan on Friday. He plans to have "thousands" of stores in the world's most populous country, he said in April, from about 400 now.

Yunnan plans to invest $452,000 to increase bean production to 200,000 tons by 2020, from the current 38,000 tons, according to the release. The province will also increase the acreage devoted to coffee almost fourfold to 247,000 acres, Starbucks said.

The coffee chain last year started selling its South of the Clouds Blend coffee, made with Yunnan beans.

Coffee-chain operators are expanding in China as increasingly affluent consumers buy more beverages in coffee shops. Starbucks is seeking to boost coffee consumption in China, which is at an annual 22 grams per person, compared with an estimated 3.3 kilograms in Japan, according to data from roaster Key Coffee.

Middle-income and affluent consumers in China will probably almost triple in 10 years, Boston Consulting Group has projected.

Sales at China's coffee shops more than tripled to $5.3 million in 2009 from $1.7 million in 2004, according to data from Euromonitor International. Starbucks dominated the market with a 70 percent market share last year, compared with No. 2 player Jiangsu Yueda Group, which operates Costa Coffee restaurants and has a 5 percent share, according to the researcher.

China had 613 specialty coffee shops last year, up from 220 in 2004. Starbucks outlets comprised 59 percent of the total, while Jiangsu Yueda controlled 6 percent by the end of 2009, according to Euromonitor.

Gourmet Master, operator of Taiwan's largest coffee-shop chain, plans to increase its China outlets more than sixfold to 1,000 by 2015.

Starbucks has about 800 stores in the Greater China region. About half are in mainland China, which doesn't include Hong Kong, Macau and Taiwan. The restaurant chain's first mainland China store opened in Beijing in 1999.

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