Starbucks Faces Stiff Competition in China
As Starbucks’ newly appointed CEO Brian Niccol prepares to visit China, he’ll be met with a landscape of fierce competition in the coffee market. The company’s same-store sales in the country have plummeted 14%, with declining foot traffic and average spend per customer.
Local Rivals on the Rise
Chinese coffee chains like Luckin Coffee, Cotti Coffee, Manner, M Stand, Seesaw, and Nowwa have been gaining popularity, offering competitive pricing and innovative menus. Luckin, for instance, has over 20,000 stores across China, with prices that undercut Starbucks by half. A small latte that costs $4.22 at Starbucks can be had for $2.25 at Luckin, $1.75 at Cotti, and $2.11 at Manner.
Express Stores Not Enough
Starbucks’ express store concept, Starbucks Now, may not be enough to compete with local rivals. While it offers a more basic interior and app-based ordering, prices remain the same as traditional Starbucks stores. In a slowing economy, Chinese consumers are looking for ways to save without compromising on quality.
Innovative Menus and Locally Sourced Beans
Chinese coffee chains are keeping their brews fresh by frequently changing menus and experimenting with unique combos. Manner, for example, boasts locally sourced beans and trained baristas working with semi-automatic coffee machines. M Stand and Seesaw offer luxurious concoctions, such as a latte in an edible oatmeal cookie cup.
Tea Rivals and International Challengers
Starbucks also faces competition from local tea specialty shops like ChaPanda, Auntea Jenny, and Mixue Bingcheng, which offer similar fruit and milk teas at roughly 60% less. International chains like Tim Hortons, Costa Coffee, McDonald’s, and KFC are also vying for market share.
Starbucks’ Unique Selling Point
Despite the intense competition, Starbucks still has its loyal customer base. The brand remains a popular spot to hang out with friends or conduct business meetings, thanks to its consistent experience: pleasant interiors, comfortable seating, cleanliness, and friendly staff. Starbucks’ high-profile aspirational brand status also continues to attract customers.
As Niccol visits China, he’ll need to assess the company’s strategy to regain its footing in the country’s competitive coffee market.
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