Right now, Starbucks fighting to remain the number one java shop in China. Despite ranking second best to competitors in Q2, the megabrand is not going down without a fight. This article examines how the chain shifted gears to stay on top — without selling more coffee!
You might be wondering why there is such hot coffee competition in the Chinese market. Especially when you consider its tea-drinking traditions going back thousands of years…
In fact, residents only drink 10 cups of coffee PER YEAR on average.
Nonetheless, there is a huge opportunity in China with consumption of the caffeinated beans rising year after year.
Because of this, more businesses want to cash in. Subsequently, Starbucks had its first real challenger in years…
Rival Luckin Coffee Was a Wake-Up Call in Q2
In 2017, Luckin Coffee locations started popping up all over China as a more affordable alternative to Starbucks.
Luckin had an aggressive expansion campaign. As such, by June of 2023, it had 10,829 stores across the country.
The new cafe on the block had its ups and downs over the years. However, they finally overtook Starbies in sales at the end of Q2… 2023…
This caused Starbucks to immediately take action because China is their second biggest market to the U.S.
IN SHORT, THEY COULDN’T AFFORD TO LOSE THEIR STAR-STUDDED CROWN.
So, how did they reclaim the number one spot from Luckin Coffee?
Starbucks Takes a “Traditional” Approach in China
As we mentioned, Luckin Coffee was designed specifically to give Starbucks a run for its money. For that reason, the Chinese caffeine adversary focused on a cheaper, grab-and-go business model.
It invested heavily in the Luckin app, mobile ordering, and smaller locations. And, those investments paid off with the young, urban crowd.
But in contrast, Starbucks decided to adjust itself to the traditions of China…
Instead of competing with LC, the global coffee giant made several critical changes.
- Built larger locations similar to Chinese tea houses.
- Crafted region-specific menus.
- Maintained their higher prices despite criticism.
Those adjustments set Starbucks apart from Luckin in the China market and it bounced back with a vengeance…
The Q3 Starbucks China Redemption Arc
After implementing this China-specific strategy and its worldwide plan to cut costs, the brand’s work paid off…
STARBUCKS EARNED $822 MILLION IN CHINA DURING THE THIRD QUARTER OF 2023!
Ultimately, the corporation’s ability to appeal to Chinese consumers was the key to success. So, Starbucks has pulled ahead in the coffee war for the time being.
In the end, it will come down to whether the market prefers traditional values or modern convenience…
Disclaimer: This content is intended to be used for educational and informational purposes only. Individual results may vary. You should perform your own due diligence and seek the advice from a professional to verify any information on our website or materials that you are relying upon if you choose to make an investment or business decision. Investment, real estate, and business involve great risk and there is no guarantee of performance or results.We are not attorneys, investment advisers, accountants, tax professionals or financial advisers and any of the content presented should not be taken as professional advice. We recommend seeking the advice of a financial professional before you invest, and we accept no liability whatsoever for any loss or damage you may incur.