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Monday, July 29, 1996 - Page updated at 12:00 AM

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Launching Starbucks In Japan -- First Of 15 Stores To Open

Seattle Times Business Reporter

Care for some sushi with that latte?

Starbucks, the nation's largest gourmet-coffee chain, is gearing up to expand its empire overseas. Starbucks will launch the first of 15 Japanese locations when it opens its flagship Tokyo store Thursday in the upscale Ginza shopping district.

No, the Seattle coffee giant does not plan to serve raw fish with its famous frothy drinks. But it does hope to bring a taste of Seattle to millions of new customers. Japan is the third-largest importer of coffee in the world, behind the U.S. and Germany.

"Our objective, the greatest thing that could happen, is that someone in Japan would think that Starbucks started in Japan," said Howard Behar, president of Starbucks International. "People in Chicago thought Starbucks started in Chicago" when the company opened stores there.

Starbucks hopes to cultivate the same kind of coffee craze in Japan that it has created in North America, not through a marketing blitz but through word of mouth, Behar said. Employees have been going through "dry runs" for the past week, serving free samples of coffee to passersby.

Starbucks plans to offer the same menu as it does in its U.S. stores, although portions may be smaller. The names of items - many of which, such as caffe latte, are Italian - will not change.

Although Behar will not divulge Starbucks' prices - the company does not want to be undersold by its Japanese competitors before its stores open - he said a latte will cost about $2 to $3.

"We are going to build a reputation one cup of coffee at a time," Behar said. "This is really like starting over. We don't have the money for a lot of advertising."

Starbucks will not say how much money its foray into Tokyo has cost the company. But officials said they do not expect to earn a profit from the Japanese venture for several years. Operating costs are double tall, and Starbucks will also pay to ship coffee to Japan from its roasting facility in Kent.

Retail space in downtown Tokyo is two to three times as expensive as in Seattle, Behar said. The flagship Tokyo store will occupy 1,500 square feet on two floors.

Just finding available rental space in a country as crowded and populous as Japan can be a challenge. That's where Starbucks' operating partner, Sazaby Inc., comes in. Starbucks formed a joint venture with Sazaby, which operates upscale retail and restaurant chains.

Starbucks plans to open four more Japanese locations by the end of the year and 10 additional stores in 1997, Behar said. Starbucks now operates 900 stores in the U.S. and plans to have 2,000 in North America by 2000. If Starbucks succeeds in Japan, the company will consider opening stores in other Asian countries.

All the Japanese stores will feature the company's trademark decor and logo.

"American customers will feel right at home in our Japanese stores," Behar said.

To prepare for the opening, the company brought eight Japanese store managers to Seattle for four months of intensive training. Starbucks officials also have been busy training coffee servers - called baristas - as well, giving them the same 23 hours of training that North American employees get.

Retail-industry analysts are optimistic about the company's prospects.

Japanese tourists love Starbucks, said Diane Daggatt, industry analyst for Dain Bosworth. Japanese consumers already drink canned coffee drinks sold in machines.

"When the Japanese come to Seattle, the tour buses always stop at Starbucks," she said. "The Japanese love American brands."

And Starbucks has a record of creating loyal customers, said Michael Moe, an analyst with Montgomery Securities. Starbucks has prospered in San Francisco, even though that city already had many similar coffee houses before Starbucks arrived.

"I remember two years ago they said Starbucks could never do it in New York, that New Yorkers would never pay $2 or $3 for a cup of coffee," Moe said. "Yet in point of fact, in New York, Starbucks has become a phenomenon just like everywhere else. One could argue New York is as much a different culture from Seattle as Japan."

But Tokyo is no Seattle.

Japanese consumers do not buy coffee to go. Unlike Americans, Japanese rarely eat or drink as they walk down the street or drive to work.

And Tokyo already has lots of coffee bars.

The Seattle coffee giant's closest competitor in Japan will be Doutor Coffee Co., Japan's leading coffee chain, with more than 400 stores, Daggatt said.

"There's already a lot of competition in Japan," Behar said. "It's what keeps me awake nights."

Copyright (c) 1996 Seattle Times Company, All Rights Reserved.

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