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Lingerers hurt Starbucks' Chinese expansion

LOS ANGELES/BEIJING -- Starbucks Corp. is on the rise in China with ambitious expansion plans but like any big new emerging market there are teething problems, not least of which is that customers love it so much, they stay for hours and hours and sometimes don't even buy a drink.

Chief Executive Howard Schultz expects mainland China to overtake Canada as Starbucks' second-largest market by 2014 and some analysts believe it could one day rival the United States as the company's biggest market.

“For a decade the core business was expats and tourists. Without question, the core business today is Chinese nationals,” Schultz told Reuters ahead of a trip to Beijing and Shanghai to meet store managers.

The world's biggest coffee chain is a symbol of Western affluence in a nation of tea drinkers. But the tendency for Chinese visitors to linger in cafes and their lower income levels means sales volumes are much smaller than the United States and other markets where taking drinks to go is the norm.

Xu Baoli, a 51-year-old stock trader in Beijing, said he visits Starbucks at least 10 times a month but doesn't go for the coffee. He is taking a break, surfing the Internet and meeting with clients.

Observers note that Chinese customers will bring sometimes their own food to Starbucks and Xu admits that every so often he doesn't bother to buy anything at all.

“I like the concept,” said Xu. “Chinese people used to think you needed a spoon and saucer to drink coffee. Now, walking around with a Starbucks cup in your hand has become a fashion statement for Chinese.”

With the U.S. market maturing, few prizes are as enticing as China and its population of more than 1.3 billion.

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