Faced with pressure from competitors such as Luckin Coffee and Tims China, Starbucks, which has always been known for its reserved attitude towards China, has been changing its strategy for tackling the country’s domestic market.
In 1999, Starbucks opened its first mainland China store in Beijing. Different from its affordable image in the United States, Starbucks positioned itself as high-end as soon as it entered China. One cappuccino started from 19 yuan at the time, a premium price given the market conditions. In addition, Starbucks founder Howard D. Schultz proposed developing Starbucks into a “third space independent of home and office,” which also gave the brand an exquisite, expensive and high-end image in China.
In order to compete for a larger market share, Starbucks has changed its thinking and carried out a series of reforms in its stores and products, combined with digitalization, to meet the challenge presented by its rivals.
On Starbucks’ app and mini-programs, it now offers many coupons. In live shopping channels, there is also a Double Eleven pre-sale discount card, which provides users with an optional 10 cups of coffee, and the price is 240 yuan ($33.07). In the past, consumers needed to pay 88 yuan to apply for a membership card, and they could only enjoy three “buy one get one free” coupons, one breakfast coupon and a size upgrade coupon. Now, members of Starbucks China can enjoy more benefits.
Starbucks is also accelerating its store expansion. In the past decade, the number of Starbucks stores Chinese mainland increased nearly tenfold, and it will reach 6,000 by the end of the fiscal year 2022. According to Starbucks’ 2025 China Strategic Vision released in September of this year, it will open 3,000 more stores in the next three years and finally achieve the goal of 9,000 stores in 2025. On average, two to three new stores will be opened every day, covering 300 cities across China.
Starbucks’ store types are now becoming more and more abundant, and the number of small stores is obviously increasing. Coffee brands featuring high speed are gradually gaining popularity in the country. In the second quarter of fiscal year 2022, Starbucks’ orders from mobile platforms in China accounted for 47%, which mainly corresponded to the pick-up and food delivery businesses.
In addition, Starbucks has increased product renewals and delivery channels for ready-to-drink coffee. The sale of bottled coffee in supermarkets, which has been tried in overseas markets in the past, is now taking on the responsibility of increasing the firm’s revenue in the Chinese market. It plans to deploy ready-to-drink coffee to 550,000 supermarkets and convenience stores in 2025. Coffee-related goods and gifts have also received attention. Starbucks China indicated that it will achieve a compound annual growth rate of 30% in the sales performance of these goods by 2025 with the help of e-commerce channels.
In order to successfully achieve China Strategic Vision in 2025, Starbucks also announced a number of major investments in the Chinese market at the September exchange meeting, including the Starbucks Coffee Creative Park with an investment of about 1.1 billion yuan. It will also invest about 1.46 billion yuan to build Starbucks’ first exclusive digital technology innovation center in China, and about 80 million yuan in public welfare and sustainable development projects.
Starbucks has also found a powerful helmsman for the Chinese market. On October 11, Starbucks China announced that Belinda Wong, the chairwoman of the firm, was re-appointed as CEO. Wong has worked hard in the Chinese market for more than 10 years and will lead the strategic vision to advance at full speed. Just last August, Belinda Wong said in an open letter that she would step down as CEO of Starbucks China.
For Starbucks, the Chinese market is undoubtedly an important component. Schultz, who returned to Starbucks for the third time, has repeatedly stated publicly that the future of Starbucks lies in the Chinese market. At a performance meeting in May, 2022, Schultz even said he firmly believed that Starbucks’ China business will eventually be bigger than its US business.