Starbucks has a China problem: coffee and tea drinkers who want more for less.
Vivian Yan tried her first Starbucks coffee eight years ago. She was desperate for a jolt of caffeine at work, and the store was nearby. “It didn’t necessarily mean I love Starbucks,” she said, “nor was it my first choice.”
These days, she thinks a cup of Starbucks is a little too expensive and prefers to get her coffee from McDonald’s. But what she really loves is ChaGee, HeyTea and other Chinese chains that sell coconut milk lattes, boba milk teas with cheese cream and sugary jasmine tea frappés. “They are delicious and offer more choices,” said Ms. Yan, 35, who is from China’s eastern province of Jiangsu.
Ms. Yan’s preference for more diverse flavors poses an acute challenge for Starbucks. It is losing customers at a rapid pace. Brian Niccol, the new chief executive, sounded the alarm in October, calling the competition “extreme” in the company’s second-biggest market behind the United States.
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An employee of Luckin Coffee, one of the more successful homegrown chains in China, preparing baijiu-liquor flavor latte in Beijing last year.Credit...Jade Gao/Agence France-Presse — Getty Images
When Starbucks opened its first shop in China in 1999, tea dominated and coffee culture was practically nonexistent. But the company quickly built a thriving market alongside a swelling middle class that was turning to iPhones, Gucci handbags and other international brands to signal its newfound wealth.
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Today, consumers are less interested in foreign brands, more cost conscious and enticed by local rivals that are popping up on corners all around the country offering something a little different. Dozens of competitors to Starbucks spin out new flavors of tea and coffee every week, at lower prices, creating competition so ferocious that Starbucks saw a 14 percent plunge in same-store sales in China in its most recent financial quarter.
Luckin Coffee expanded rapidly in the past few years
Luckin
20,000 stores
15,000
10,000
Luckin closed stores in the first year of the pandemic before resuming the expansion.
Starbucks
5,000
0
2018
2019
2020
2021
2022
2023
2024
Luckin
20,000 stores
15,000
Luckin closed stores in the first year of the pandemic before resuming the expansion.
10,000
Starbucks
5,000
0
2018
2019
2020
2021
2022
2023
2024
Sources: Starbucks and Luckin quarterly results
Note: Data includes company-owned and licensed stores.
Local brands offer creative flavors at lower prices
Luckin drinks
Starbucks drinks
0
$1
$2
$3
$4
$5
Starbucks charges 30 yuan for an Americano, more than double the price of Luckin.
Luckin’s Americano costs 14 renminbi, a little under $2.
Sweet
potato
tea latte
Red wine Americano
Luckin came out with two baijiu infused Moutai lattes last year.
Cold brew with sparkling grape juice
A series of seasonal
strawberry drinks
A series of seasonal
strawberry drinks
$5
Sweet potato
tea latte
Starbucks charges 30 renminbi,
about $4.1, for an Americano.
$4
Red wine Americano
Cold brew with
sparkling grape juice
$3
Apple juice Americano
Luckin came out with
two baijiu infused
Moutai lattes last year.
$2
Luckin’s Americano costs
14 renminbi, a little under $2,
less than half of Starbucks’ price.
$1
A series of seasonal
strawberry drinks
$5
Sweet potato
tea latte
Starbucks charges
30 renminbi, about
$4.1, for an Americano.
$4
Cold brew with
sparkling grape juice
$3
Apple juice Americano
Luckin came out
with two baijiu
infused Moutai
lattes last year.
$2
Luckin’s Americano costs
14 renminbi, a little under $2,
less than half of Starbucks’ price.
$1
Note: Data from mobile ordering apps on December 3, 2024. Menus are based on one Luckin and one Starbucks store in Jing’an District in Shanghai. Prices listed are for Luckin’s regular size (450ml) and Starbucks’ Grande size (473ml). Espresso shots are excluded.
Starbucks’ China Problem: Coffee Drinkers Want More for Less - The New York Times
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