It is said that imitation is the sincerest form of flattery, but Starbucks has found that too many copycats are piggybacking on its success in China. In  fact, the counterfeiters have become so brazen that they are now setting up separate retail channels in supermarkets.

The largest foreign coffee chain in China, Starbucks has admitted that it cannot determine the source of an instant brand that has suddenly appeared at shops in Beijing and Nanjing under the label “Starbucks VIA Coffee” and manufactured by Guangzhou Baiyi, Jiangsu Television reported.

Starbucks gets its imported products solely from a wholly-owned subsidiary in Shanghai and has said it did not authorize distribution through Baiyi, a company set up in April last year. To make things worse, Baiyi has started to market its Starbucks version through supermarkets; the real product is only sold online through TMall, a venture run by Alibaba Group.

Baiyi coffee has a similar packaging style, carries the Starbucks logo and even has the same security label.

The Starbucks instant coffee sold by Guangzhou Baiyi (right) looks much like the licensed product (left). Photo: Weibo

Wuxi police investigated the fake coffee, made in Guangzhou, and estimated Baiyi had so far made more than 10 million yuan (US$1.49 million) of profits. Netizens were shocked by the revelation, with many saying they do not who to believe if there are fake goods in supermarkets.

In another incident, Starbucks China discovered that four glass manufacturers were producing its distinctive cat paw-shaped limited edition coffee mugs without authorization. Jiangsu police shut down the operations last Thursday and arrested those responsible.

There were fights outside various Starbucks outlets last month when supplies began to run out. Some buyers even paid 1,800 yuan (US$268) for the mugs, which are usually priced at just 199 yuan ($29.60).

Read: Fights in Starbucks China over cat-paw mugs

Starbucks is also facing competition from local rival Luckin Coffee, which only started operations 18 months ago but has quickly expanded its chain  to 2,000 outlets and plans to open 2,500 stores this year. It is reported that Luckin could raise US$3 billion in an initial public offering this year.

Despite these challenges, Starbucks is sticking with China, which is one of its fastest growing markets. Last year the US firm opened 612 new stores, and it plans to add 600 more through to 2022 in the tea-drinking nation. In all, Starbucks has 3,600 stores in more than 150 mainland cities.