On December 13, the Beijing News reported that Starbucks had food safety problems such as tampering with the shelf life and selling expired cakes. For a time, related topics such as "Starbucks private ingredient label uses expired ingredients" quickly appeared on Weibo hot search.
According to a previous report by the Beijing News, the reporter went undercover into the Wuxi Starbucks Zhenze Road store and Starbucks Wuxi Changxing Building store to work, during which he found that the store memory was using expired black tea liquid and matcha liquid, the supervisor and the clerk "taught by example" to tamper with the shelf life, and some ingredients were artificially "extended" for a week; the pastries that promised to "not stay overnight after opening" were listed overnight.
Subsequently, @Starbucks China's official Weibo issued an apology statement, saying that it was deeply shocked and had closed two stores at the first time.
On the evening of December 13, the Wuxi Market Supervision and Administration Bureau issued a statement saying that it had preliminarily verified that the Starbucks store involved had changed the internal control period of food raw materials.
The Beijing News shell financial reporter noted that this is not the first time that Starbucks has had a safety problem. Not long ago, some Starbucks stores were punished for food problems. Some whistleblowers who claim to be former employees of Starbucks have reported that the tampering with shelf life in Starbucks stores is not an isolated case.
As Chinese consumers' acceptance of coffee increases, the coffee market track continues to heat up. China's local specialty coffee brands and international coffee brands entering the Chinese market are challenging Starbucks' position, and not only that, but new tea drinks and long-established brands are also pouring into the ready-made coffee track.
Food safety problems occur frequently, and disputes occur in stores in many places
On December 13, @Starbucks China issued a statement saying, "We have paid attention to reports about two Starbucks stores in Wuxi. We are deeply shocked by the food safety issues covered in the report. Starbucks said it had closed the two stores at the first time and immediately launched an in-depth investigation.
Subsequently, the Beijing News shell financial reporter searched for Ele.me, Meituan, Starbucks App found that the two stores involved starbucks Wuxi Zhenze Road store, Wuxi Changxing Building store both showed that "this store has been closed, please come back another day." ”
On the evening of December 13, the Wuxi Market Supervision and Administration Bureau issued a statement saying that it had preliminarily verified that the Starbucks store involved had changed the internal control period logo of food raw materials and other behaviors, and had instructed the 2 stores involved to close for rectification. The Wuxi market supervision department also carried out an inspection of 82 other Starbucks stores in the city at the same time, and found that 15 problems such as employees not wearing work hats, messy placement of items in the processing area, and incomplete disinfection records have been ordered to rectify. The Wuxi Municipal Bureau of Market Supervision conducted an administrative interview with Starbucks (China) Northeast China, requiring the company to conduct a comprehensive self-examination of the existing food safety problems and implement rectification.
On the night of December 13, @Starbucks China said, "After investigation, we have confirmed that the partners (employees) of the two Wuxi stores reported by the media on December 13 did have operational irregularities." We have an unshirkable responsibility to ensure food safety. The situation in these two stores is a high warning of our shortcomings in the daily implementation of food safety standards. In this regard, we would like to express our sincerest apologies to all Starbucks customers. ”
After the above two stores appeared to use expired ingredients and other problems, other whistleblowers who claimed to be former employees of Starbucks told reporters that the stores where they had worked had also tampered with the shelf life.
"The store manager asked us to tear off the expiring labels of food materials and put them on new ones during the training." Li Xiaoxia (pseudonym) told the Beijing News Shell financial reporter that he had worked at a Starbucks in a city in Jiangsu, and the company originally had a clear stipulation that a timer should be placed next to the food materials to remind the expiration time, but the store manager told the employees that there was no need to manage the reminder of the timer, if it was pressed. Li Xiaoxia said that although Starbucks's rules and regulations are very strict, the store manager asked employees to label the expired materials before closing every day during the training, and the food ingredients that he was in the store at the time even appeared to be expired in three hours were used for one to two days.
The reporter noted that not long ago, some Starbucks stores were punished for food problems.
According to the National Enterprise Credit Information Publicity System, on November 24, 2021, the Yantian Yihaicheng Second Branch of Starbucks Coffee (Shenzhen) Co., Ltd. violated the Food Safety Law of the People's Republic of China because it did not clean up food (Taiwanese mooncakes) that exceeded the shelf life in a timely manner, and the Yantian Supervision Bureau of the Shenzhen Municipal Market Supervision Bureau decided to impose a warning on the branch.
In addition, Chengdu Starbucks Coffee Co., Ltd. Chongqing Commercial Building Branch and Chongqing City Balcony Branch have been sued for product liability disputes.
In terms of black cat complaints, complaints about Starbucks are also mostly food safety problems, eating diarrhea, drinking flies, etc.
According to the official website of Starbucks China, "Based on the highest standards in the industry, we have formulated and strictly implemented the 'gold standards' for Food Safety of Starbucks to ensure that from source supply, warehousing and logistics to store operations, from product design, manufacturing and manufacturing to partners (employees) to serve customers, we provide customers with safe and high-quality food and beverages." ”
At the same time, according to the regulations, its stores should conduct food safety self-inspection every day, and each store should undergo at least one third-party surprise inspection every year, and 20% of the stores should undergo a second flight inspection.
According to the official website of Starbucks, all of its current stores in the Chinese mainland market have adopted the company's direct business model and are not open to the public to join.
Why is the internal audit so strict under the direct store model that it has repeatedly been exposed to food safety problems? Chinese food industry analyst Zhu Danpeng told the Beijing News Shell Financial Reporter that although Starbucks is a direct operation model in China, at present, all Starbucks stores adopt the store manager responsibility system, performance-oriented, profit-oriented, so it is likely to turn a blind eye to food safety.
Zhu Wei, deputy director of the Communication Law Research Center of China University of Political Science and Law, said that if direct stores and franchise stores provide expired food to consumers or defraud consumers, there is no difference in liability determination, because they belong to the producers and operators who provide goods and services to consumers. However, because the direct store is vertical management, the franchise store is entered by other teams by purchasing the brand's special license, so everyone believes that the management of the direct store should be more efficient and better protect everyone's rights.
Continued expansion was weak, with same-store sales falling in the fourth quarter
In 1999, the first Starbucks opened at the China World Mall in Beijing, when China was still considered a tea-only country, drinking coffee became a novelty, and Starbucks' business in China had lost money for many years.
Howard Schultz, honorary chairman of the board of directors of Starbucks Corporation, said in his autobiography "All the Way Forward" that at that time, years of losses formed a huge pressure to leave and abandon the Chinese market both inside and outside the company.
With the improvement of Chinese consumers' acceptance of coffee and the maturity of store operations in the Chinese market, Starbucks began to increase its size in the Chinese market.
Public information shows that in the early days of China, starbucks and Beijing Sanyuan Group and some funds joined hands with Meida, Unity and Hong Kong Maxim's Group to adopt a franchise model. After China allowed foreign-owned enterprises to open stores in 2005, Starbucks established a wholly-owned company, Qingdao American Starbucks Coffee Co., Ltd., and in 2006 Starbucks stopped developing franchises in China.
In 2017, Starbucks Coffee Corporation announced that it had formally entered into an acquisition agreement with its long-term joint venture partners Unity Enterprise Co., Ltd. and Unity Supermarket Co., Ltd., whereby Starbucks acquired the remaining 50% stake in Starbucks' East China Market joint venture (Shanghai Unified Starbucks Coffee Co., Ltd.) for approximately US$1.3 billion in cash.
So far, Starbucks has achieved 100% control of all stores in the Chinese mainland market. On October 28, Starbucks released its fiscal 2021 financial report for the fiscal year ended October 3 this year, during which Starbucks consolidated net revenue was $29.06 billion and net profit was $4.2 billion. Stores in the U.S. and China account for 62 percent of the company's global stores, with 15,450 and 5,360 stores, respectively.
Among them, the number of stores in the Chinese market rose from 4706 stores in 2020 to 5360, a net increase of 654 new stores this year, higher than the 581 new stores opened in 2020.
Starbucks, which has experienced 22 years of development in China, has continued to expand while also showing weakness. According to the financial report, in fiscal 2021 (the year ending October 3 this year), Starbucks same-store sales in the Chinese market increased by 17%. In the fourth quarter, Revenue from china was US$964 million (approximately RMB6.166 billion), an increase of 18% year-on-year, and same-store sales fell by 7% during the period. In this regard, Starbucks said that it was mainly affected by the repeated epidemic in mid-August, and 80% of its stores in China were affected.
"China is one of our most important markets." Kevin Johnson, president and CEO of Starbucks Coffee Company, has said in several earnings calls that he has long been optimistic about the US and Chinese markets, mainly these two major markets leading the growth of Starbucks' business. At the same time, he believes that the Chinese market is still a track with room for growth, and in this market, we must continue to open new stores and continue to seek rapid expansion.
Track congestion has intensified, and Starbucks is facing challenges from new players such as Luckin and Xicha
In recent years, as the coffee market continues to heat up, Starbucks' Chinese market is facing unprecedented challenges.
In 2019, Chinese coffee shop chain Luckin Coffee was listed in the United States. According to luckin coffee prospectus, the size of China's coffee market reached 56.9 billion yuan in 2018. With the improvement of the living standards of our people and the growing awareness of coffee culture, coupled with the huge demographic dividend, domestic coffee consumption is stimulated. It is estimated that in 2023, the average coffee consumption of Chinese will be 10.8 cups, and the coffee market size will be 180.6 billion yuan.
Huge market dividends continue to stimulate investors. This year, in the coffee field, whether it is "fast coffee" or "slow coffee", the capital market has frequently invested in olive branches. Luckin Coffee reached a new round of financing agreements totaling US$250 million with Dapu Capital and Joy Capital in April, with Manner, a chain brand of specialty coffee, completing four rounds of financing in six months, and M Stand completing a Series B financing of 500 million yuan in July this year.
The new tea giant Xicha led the specialty coffee brand seesaw, and Naixue, CoCo and other brands specializing in new tea drinks have also launched a number of coffee flavor products, with prices ranging from more than ten yuan to more than thirty yuan. On November 16, McDonald's announced that its brand Mai Coffee plans to invest 2.5 billion yuan in the next three years to Chinese mainland market, and it is expected that by 2023, there will be more than 4,000 Mai coffees in the country.
Enterprise investigation data show that from 2018 to the third quarter of 2021, the financing amount of Chinese coffee enterprises showed an upward trend, and in the first three quarters of 2021, the financing amount of coffee enterprises has exceeded the whole of 2019, reaching 5.984 billion yuan, and the number of financing is also as high as 30.
On December 9, Luckin Coffee released an unaudited financial report for the third quarter of 2021, which showed that the total net income of Luckin Coffee in the third quarter of 2021 was 2.3502 billion yuan, an increase of 105.6% over the same period last year, and the net loss of 23.5 million yuan was 98.6% smaller than 1.7 billion yuan in the same period last year. At present, there are a total of 5671 stores, of which 4206 are self-operated stores, an increase of 6.4% over the same period of the previous year, and the sales of self-operated stores increased by 75.8%.
Lai Yang, a member of the Expert Committee of the China Federation of Commerce, told the Beijing News Shell Financial Reporter that the competition facing Starbucks is actually the competition of the whole industry chain, both the coffee market and the competition of other beverages, especially the rapid rise of milk tea drinks, the interest of young people in generation Z in milk tea is also much higher than coffee, and the rapid rise of this milk tea shop is also greatly diverting the coffee market.
Beijing News shell financial reporter Zhao Fangyuan Editor Xu Chao