While closing unprofitable stores in the US, Starbucks has also downsized its plan for the number of international stores from 900 to 700 for fiscal year 2009. Two-thirds of the stores are expected to be licensed, which usually involves less cost to operate than self-owned stores.

"Speed and expansion can cover a lot of mistakes. I think it's a very important moment for us to take a pause and look at ourselves in the mirror," Coles said at a recent event marking the firm's 10th anniversary in China.

Skeptics have suggested that sourcing coffee beans in China is nothing more than a part of Starbucks' US$400-million cost-cutting plan for fiscal year 2009. Coles said the cost-saving campaign "has nothing to do with sourcing from China". He explained that the company's cost cutting targets the elimination of "redundancies" and inefficiency.

"We buy coffee beans from China and roast in the US. Then we bring the roasted coffee back to China. So in terms of cost reduction, there is nothing," Coles said.

"The essence is about how we create a presence of Chinese coffee in the world. I hope one day when I walk into a local store in Washington, my barista behind the counter would ask me to taste the South of the Clouds blend and tell me the story of the village from which it came," Coles said.

Starbucks has been working for three years with farmers and government officials in Yunnan to look for coffee beans that meet its strict standard.

Yunnan produces about 30,000 tons of coffee annually, contributing 98 percent of China's total coffee output. Nearly 70 percent of the coffee is exported. Nestle has been purchasing coffee beans from Yunnan for over a decade.

"Although we provide coffee beans to many international coffee producers, Yunnan coffee is still little known to the world. Poor marketing is a major reason," said Yang Shiji, vice-director of the development research center of the Yunnan government.

Yang said the local government has signed a strategic agreement with Starbucks to help coffee growers improve yield and quality.

"We hope the partnership can bring us not only advanced production techniques but also new management and marketing methods," Yang said.

(China Daily February 5, 2009)