Starbucks, now led by new CEO Brian Niccol, is facing significant challenges in China, where same-store sales recently dropped 14% due to declining foot traffic and lower average spending per customer. To get a clearer understanding of these difficulties and plan a better strategy, Niccol is set to visit China in early December 2024.
The company is up against fierce competition from local coffee brands that are capturing attention with their low-cost models and aggressive pricing. Luckin Coffee leads the charge with over 20,000 stores, despite past accounting scandals. Other notable contenders, like Cotti Coffee and Manner, offer lattes at prices nearly half of Starbucks’ $4.22 price in Beijing. On some days, Luckin even runs promotions that bring prices down to just 90 cents.
These homegrown brands operate compact, no-frills shops that often have minimal seating and as few as one barista. While their food offerings are simple, they manage to appeal to budget-conscious consumers looking for good coffee at a better price. To keep customers engaged, they regularly refresh their menus, experimenting with creative combinations like coffee mixed with fruit juice, rice, or even cheese.
Starbucks has tried to compete with its express-style Starbucks Now stores, but without significant price cuts, they haven't been able to close the affordability gap. The competition doesn’t stop at coffee; tea chains such as Mixue Bingcheng and Auntea Jenny are also pulling in customers with tea and coffee drinks priced as low as 56 cents.
With economic conditions pressuring spending, many Chinese consumers are turning to options that don’t sacrifice quality for price. Niccol’s upcoming visit will be pivotal in crafting a strategy to meet these new consumer expectations and navigate the evolving market.