BBC 全球服务 中国咖啡之战——星巴克为何在与瑞幸的竞争中失利

It wasn't long ago that China was Starbucks poster child of successful international expansion.

China was viewed as a fertile growth

opportunity. Just given an urbanization of the population, a growing middle class, as well as proclivity for Western brands,

we can build Starbuck stores in China as fast as we can for the rest of my life, and still have addressable market to gain in China.

From 2017 to 2020, starbucks added about 30 200 stores in China.

Revenue was hit hard by pandemic lockdowns in 2020.

Despite china's strict, zero coded policies, the company rebounded with explosive sales growth the following year, but sales have since stagnated.

Between 2021 and 2024, revenue is down about $700 million, all while Starbucks added an additional 2200 stores in the country.

This is emblematic of a market it's maturing.

Where you do have multiple entrance And the U-S, of course, there is multiple strong coffee competitors.

China didn't necessarily have that ten years ago, but now you do.

So what's creating this dragon in China?

And can Starbucks turn things around?

Despite volatility in recent years? Starbucks is a historically strong brand that has hope shaped modern day coffee culture across the world.

Going out for a cappuccino or a latte was not as much of a thing in the U-S prior to the 1990s.

So Starbucks defined that. In China, they also sort of defined the culture, except coffee itself was not widely drank at all in China.

Prior to one Starbucks entered 25 years ago, starbucks grew its presence in China relatively unchallenged until 2017, that's when its biggest competitor, lucken, entered the market.

By the end of 2018, its valuation had surpased $2 billion, and the domestic competitor already had about half the number of stores that Starbucks did.

What's always been interesting about Starbucks is that it hasn't had a natural domestic rival.

There are a lot of other American brands that do, but, but Starbucks hasn't.

So all their competitors have been cost up from the UK or UCC from Japan.

But by 2020, it seemed that luckin may not have become the threat that Starbucks initially feared.

After news broke that the company fabricated over $300 million in sales, it shut down hundreds of stores and was delisted from the NASDAQ in 2020.

Still, it emerged from bankruptcy in 2022 and restructured its financial position from 2022 to 2024.

Luck in more than doubled its store count.

It now has roughly 6000 more company operated stores than Starbucks.

Its nope owns a pair down coffee shop that allows them to expand fast at a much lower price.

Court. If the taste difference is not differentiating enough, this is dangerous for her book, and luckin has proved, just as Starbucks did in its 1st days, really good at marketing itself.

Lockins done a really good job putting their locations in a ton of different places, growing location numbers dramatically.

A lot of these are very small locations, so very easy to set up.

You can put them in places like universities and schools and hospitals, and people can just go and get a cup of coffee very quickly.

Whereas the Starbucks experience is more of an in store experience, lucky utilizes a grab and go model.

The only way customers can order is through a mobile app.

The company was at the forefront of the now standard catering model when it 1st opened in China.

Take a look at Starbucks app traffic compared to luck it.

Starbucks saw a spike in 2021, but more recently, it is laged behind.

Lucking. Historically, starbucks has distinguished itself through premiumization.

That was especially true in China, when it went virtually unrivaled for many years, and consumer confidence was strong.

That changed after the pandemic over the last few years, starting really in 2122, you really saw a step up the amount of competitive activity as well in China.

And I want to say it was around 2022, 2023, when you really start to see the rise of value you're really utilized within within a competitive set.

The Chinese consumer has been under a lot of economic pressure in recent years.

Consumer spending is down. That means discretionary purchases, like a coffee, are the 1st to go is Our survey indicated that when we ask consumers, will we be cutting back to save money?

Dining out of restaurants was ranked number one.

Coffee consumers in China tend to be in their teens, twenties and thirties.

That's the largest and fastest growing market.

But this is ones that have been hit the greatest by the economics go down, beginning with zero covet and the lack of rebound of the Chinese economy, ever since the collapse of the real estate market, in which people, including their own paren'ts, who have invested a lot in real state suddenly feel 2030, 40% poorer than they were before.

That's why luck in coffee's biggest edge against Starbucks is price, while the sticker price of a latte at both companies is actually relatively similar luck and is known for consistently offering steep discounts.

Starbucks, which rarely offers coupons, has been forced into it.

China is seeing a lot of promotions right now because consumers are still under pressure.

So you are seeing kind of a drag from that.

In some cases, you are seeing companies that sort of have traffic growth, but check declines because of the level of promotions.

Other notable competitors include Katy Coffee and Manner, whose drinks typically run at least half the price of Starbucks.

You ve got competitors that are growing very quickly.

You ve got the fact as well that coffee, by nature, is a high margin business, and so competitors can afford to provide discounts, just given there's a high customer lifetime value.

Over the past two years, starbucks has been growing its number of customers in China, but people are spending less at its stores.

And there's more to the story than just competition.

Chinese nationalism has grown. As political tensions remain high between the U-S and China, the effects trickle down to even coffee consumption.

It really starts as a luxury product.

At the same time, it's subject in a moment of international tension, to what you might think of as brand nationalism.

It's not that people are anti Starbucks or anti American in not buying Stars, but you might be more tempted, or at least you're taking a somebody out for a date.

Don't take this woman to show off that you're well off by taking her to a fancy coffee.

They take her to a patriotic and jungle tosoda coffee, a special coffee with Chinese characteristics.

While competition in the country is far more elevated than a decade ago, there's still a lot of space for Starbucks to grow.

China s population is more than four times that of the US.

Plus out of home. Coffee as a concept is still relatively new there, and Starbucks differentiates itself as a sit down option, while a lot of competitors are gravin go.

In the spring, we ran a survey of 2000 consumers in China, and the survey told us that while 80% of consumers and respondents identified as coffee drinkers, only 18% drink coffee on a daily basis, signaling that starts as an early innings and what was historically a tea drinking nation.

Interestingly, we ask about brand perceptions.

Starbucks ranked highest on taste profile and ranked 2nd on value, 2nd to category leader, luck in the market.

In december 2024, starbucks hired a chief growth officer to helps through the company back on course in China, experts say there is opportunity to optimize the brands offering beyond just cost considerations.

I don't think competing on prices is really the answer there.

One of the things they might look into is localization efforts.

Other players, like KFC and Burger King have done a bit of this, or they partner with local players focus on that premium growth, but with a bit more of a local eye walkins been doing a whole lot with different flights neighbors, and they explore lots of different flavors on a month to month basis.

Another way that luckin has been able to expand so quickly is by franchising its establishments.

It has around 13400 company owned stores in 70, 400 partnership stores.

It collects royalties from these independently run partnership stores.

Starbucks operates that same type of mixed model in the US.

It licenses operators to run stores that are typically found inside targets or airports where real estate would otherwise be inaccessible.

In China, all of Starbucks establishments are currently company operated.

It's a matter of when, not if, that you see the China ownership structure shift into something more asset light, for instance, via licency or a joint venture.

Typically what you see international markets is that is an all or nothing.

And I think that with China, it would make sense to make it 100% license your franchise, rather than splitting that up.

It creates a little bit less earnings volatility.

I think it creates a little bit less operational risk.

It can reduce brand risk if you have sort of a local owner operator, even though you still Western brand, right?

You have a local owner operator.

And so I think in today's political environment, that probably makes more sense.

In its latest earnings call, starbucks said it was continuing, to, quote, explore strategic partnerships.

That essentially means it's still considering licensing as an option, but it remains to be seen how it's ultimately going to move forward.

The company declined an interview with CNBC for the story.

While Starbucks still has plenty of white space in China, the key debate for investors is who is right to build that?

Is it the company, as this remains status quo that starts with conti to own China and bank on an ultimate recovery?

Or will the company find a local partner who will help build the stores and license the stores and paystrokes are royalty instead.

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