Ignition Dimension (ID: chaintruth) original
Produced by Burning Finance
Author | Cao Yang Zhang Lin
Edit | Cao Yang
Starbucks is double on the hot search again.
Following the "'drive away' police" incident that fluctuated up and down the Weibo hot search for many days, on February 16, Starbucks was on the hot search because of the "Starbucks price increase".
The staff of a Starbucks store in Chaoyang District, Beijing, told Burning Finance that the price increase began on February 16 and belonged to the price increase of some drinks and foods, of which the price of American coffee per cup was increased by 2 yuan, and the price of other drinks and foods was increased by 1 yuan.
When Burning Finance said, "At this stage, Starbucks is being boycotted by consumers on the Internet, will the price increase not be more affected?" When questioned, the clerk of the starbucks store said bluntly, "Weibo's hot search actually has no impact on other stores, at least the operation of their own stores." ”
For the price increase of Starbucks, some netizens said, "The price increase creates a news in order to dilute the heat of another news." ”
The "other news" that the netizen said is undoubtedly the uproar caused by Starbucks on the Internet recently because "the clerk of a store in Chongqing 'drove away' the police who 'ate a box lunch' in the customer area outside the store".
As of the press release, the Weibo topics #Starbucks Price Increase# and #Chongqing Starbucks Stores Involved in the Incident were sent white flowers and thrown eggs# related to the above two events have reached 220 million times and 420 million times, respectively, and the number of related discussions has exceeded 20,000 times.
In fact, as early as half a month ago, in Starbucks' first quarter 2022 financial report, its CEO Kevin Johnson has already revealed the news that Starbucks is about to increase prices, and may implement multiple price increases in 2022.
Behind the price increase, although it is closely related to the rise in raw materials and operating costs, it is also inseparable from the pressure facing Starbucks.
Starbucks, which officially entered China in 1999, once became synonymous with petty bourgeoisie and has long occupied the leading position in the market share of Chinese coffee brands. However, in recent years, under the rapid growth of China's coffee consumer market, whether it is the continuous emergence of competitors or the upgrading of the needs of a new generation of consumers, Starbucks, the "big brother", has been exhausted.
According to Frost & Sullivan statistics, China has now become the fastest growing market in the world for coffee consumption, with the market size rising from 5.7 billion yuan in 2013 to 28.4 billion yuan in 2017, and is expected to further grow to 157.9 billion yuan in 2023, with a compound annual growth rate of 39%.
China's fast-growing coffee consumer market has attracted more and more "players" to enter the game, forming a new competitive pattern of "three-legged standing" of established coffee chains, new specialty coffee stores and affordable coffee. Just like that, at the same time that Starbucks was criticized for price increases, Guo Jinyi, chairman and CEO of Luckin Coffee, released an internal letter to Luckin's 20,000 employees, showing that in January this year, Luckin opened a total of about 360 stores, refreshing the record of the total number of stores opened by Luckin in a single month.
Mao Zuodong, a senior researcher of chain brands, previously told Burning Finance that the reason why traditional coffee brands represented by Starbucks are under greater pressure is that with the vigorous development of China's coffee market, major brands have successively entered the race, squeezing the traditional coffee brand market. "But the main reason is that the 'Starbucks' are too traditional, and this tradition is mainly reflected in the thinking of management." Although these traditional brands are also exploring new models, they have not been able to break out of their own shackles. ”
"Arrogance" is the comment of many consumers on Starbucks, how long can Starbucks continue to be "arrogant" under internal and external troubles?
"Arrogant" Starbucks
Starbucks has been in hot search for more than 4 days.
On February 13, some netizens posted on Weibo that the police of a Starbucks in Chongqing who rushed to the door to eat a box lunch also maliciously complained. Subsequently, discussions related to the incident emerged in an endless stream, arousing the anger of netizens and attracting the attention of Starbucks.
On the 14th, Starbucks customer service staff took the lead in responding that the store involved was a Ciqikou backstreet store, which had received relevant reports and was under internal investigation. At six o'clock in the afternoon of the same day, Starbucks China sorted out the incident in a post on its official Weibo, and said that "the store partner and the police concerned caused a communication misunderstanding due to inappropriate speech when coordinating seats" and "there is no situation of 'driving away the police' and 'complaining about the police' spread on the Internet."
At the same time, the microblog also mentioned that "Starbucks welcomes every customer as always."
Photo/Starbucks statement
Source/Starbucks Weibo
However, netizens do not seem to buy this response of Starbucks, but many netizens have said in the comment area, "This statement seems to be just a misunderstanding? It is not an apology", "there is not even an official document, this attitude is really perfunctory", "The eviction and complaint are true, please apologize in writing immediately, dismiss the relevant personnel, and punish the corresponding leaders." If it is a rumor, please pursue the legal responsibility of the rumor-monger. Instead of responding hastily like this. ”
Subsequently, the incident not only continued to ferment on social platforms, netizens also expressed their dissatisfaction with Starbucks with their own practical actions, spontaneously giving the stores involved a half-star bad rating on a number of local life and review websites. As of now, the store has a rating of 3.6 points on Dianping, becoming the eleventh to last in Chongqing Starbucks' scoring rankings.
At the same time, according to jiupai news and boiling point video reports, some local citizens found that someone in front of the Starbucks involved in the incident sent white flowers and threw a rotten egg on the ground. When the cleaning staff wanted to clean, they were dissuaded by the public and said, "Don't sweep, don't sweep." ”
However, although the boycott of Starbucks on social platforms has almost shown a one-sided phenomenon, contrary to the adjustment of the store closure and strong resistance, when Burning Finance visited a number of stores located near Beijing South Railway Station in Fengtai District of Beijing and a business district in Chaoyang District, it was found that the operation of these stores was almost not affected in any way.
A Starbucks in an office building in Beijing's Chaoyang District found that at 2 p.m., the Starbucks store was full. At the same time, several Starbucks stores in Beijing South Railway Station were also full of seats, and many consumers chose to pack.
A customer who is spending in a Starbucks store at Beijing South Railway Station told Burning Finance that Starbucks' wave of operations is really bad, but Ruixing, which is closest to Beijing South Railway Station, is also 1.5 kilometers away. "Objectively speaking, Starbucks' store coverage rate is indeed very high, but it is also true that the coffee is getting worse and worse." It should be admitted to customers that for people who like coffee, there is no better choice for waiting for the car.
Amy is a planner for a PR firm and a deep fan of Starbucks. "It feels like starbucks missed another pry opportunity to deliver to the door perfectly this time." If the clerk thinks that the police sitting at the door will make customers nervous, they can arrange a relatively deserted seat for them, and even send coffee to show their condolences in the name of thanking them for serving the people. This kind of picture, any customer who takes a picture and sends a Weibo circle of friends, is a kind of free marketing with high cost performance! ”
Amy told Burning Finance that there have been many public relations crises in Starbucks in the past two years, and many of them have begun to ferment from the store, which may expose that Starbucks has some problems that cannot be ignored in store management training.
In fact, starbucks has frequently had undesirable effects due to those "non-negligible" problems. On December 13, 2021, a reporter from the Beijing News "went undercover" at two Starbucks stores in Wuxi, Jiangsu Province, exposing Starbucks' use of "expired ingredients", "tampering with the shelf life of ingredients", "scrapped pastries on the shelves the next day" and other behaviors that touched food safety red lines. The report also quickly made it onto Weibo's hot search list.
On the day the incident was exposed, Starbucks China's official Weibo 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. However, the majority of netizens pointed out that Starbucks insists on direct operation in China and cannot be unaware of these things. CCTV also commented that Starbucks' "shock" was shocking.
Earlier, in August 2020, Starbucks also caused a hot discussion because a store refused to accept coins. Although Starbucks later said, "Apologize for the poor customer experience, there is no refusal of coins." However, netizens unanimously believed that his reply attitude was arrogant, not from the heart to apologize, and there was no explanation for how the employees involved would deal with the follow-up.
As netizens said, "arrogance" is almost synonymous with Starbucks. In the "2021 China Coffee Online Review Mining Research Report", Starbucks received 56% of the bad reviews in terms of service, of which the most frequent occurrence was "arrogance".
Crazy to open a store, but also difficult to decline in performance
However, what "arrogance" cannot hide is a series of actions put into place by Starbucks in order to protect the Chinese market.
Starbucks financial report shows that in the 2021 fiscal year, the Chinese market contributed 12.7% of Starbucks' global revenue, reaching $3.69 billion. In the earnings report, Starbucks specifically emphasized that "China is our fastest growing market, our second largest market, and it is 100% owned by the company." ”
Therefore, in order to maintain the world's second largest market, Starbucks has opened stores in the Chinese market while frantically closing stores in other markets.
Photo: A Starbucks store in Beijing
Source/Burning Finance Photo
In June 2020, Starbucks announced plans to permanently close about 400 stores in the Americas over the next 18 months. Over the next two years, it will also reorganize its operations in Canada, including closing 200 stores.
But in the past two years, Starbucks has opened more than 1,200 new stores in the Chinese market, most of which were newly opened during the epidemic, and these new stores have brought Starbucks nearly 70% of the growth in the Chinese market.
As of January 2, 2022, Starbucks had 5,557 stores in the Chinese market. It is reported that Starbucks had planned to reach 6,000 stores in China in fiscal 2022 and enter 230 cities.
But the opposite of Starbucks' crazy store opening in China is its declining same-store sales.
Starbucks, which is frequently caught in turmoil, may show its anxiety in the Chinese market from the side.
On February 1, Starbucks released its fiscal 2022 first quarter financial results (results for October 4, 2021 to January 2, 2022). During the reporting period, Starbucks achieved 19% growth in revenue to $8.05 billion, above market expectations of $7.95 billion, and net income of $815.9 million, also up from $622.2 million in the same period last year.
At the same time, Starbucks also achieved a 13% increase in global same-store sales in the first quarter of 2022, of which same-store sales in the United States, starbucks' largest market, increased by 18% year-on-year.
But outside the U.S., its same-store sales figures are much bleaker. According to the financial report, Starbucks international same-store sales fell by 3%, and China, as Starbucks's second largest market, far exceeded the international same-store sales decline in the reporting period, as high as 14%. In the fourth quarter of last year, the figure was 7 percent. In addition, in the first quarter of fiscal 2022, Starbucks' average customer unit price and transaction value in China also fell by 9% and 6%, respectively.
After the earnings report, Starbucks shares fell more than 4% after hours. In fact, since the beginning of 2022, Starbucks' stock price has been in a state of decline. According to Tiger Securities, Starbucks shares peaked at $117.80 per share on January 3 this year, and as of the close of trading on February 16, its stock price was $94.51 per share, a decline of 19.8%.
As a result, price increases may become the most direct way for Starbucks to improve its performance.
As early as this year's first quarter earnings report, Starbucks CEO Kevin Johnson revealed that it is expected to continue to increase prices in the coming months, and it is expected to increase prices again in 2022.
This price increase is already the second price increase of Starbucks since October 2021. Earlier, Starbucks CHIEF Operating Officer John Culver said that the price increases did not have any impact on customer demand.
In response to this price increase on February 16, Starbucks's official customer service responded that this time it was only adjusted for some drinks and food pricing, and it was a comprehensive assessment and consideration of operating costs and other factors.
Starbucks is under a lot of pressure
For the Starbucks Chinese market, the downward trend may continue. After all, China's fast-growing coffee market has attracted a large number of coffee brands to join.
Li Xinyi, an analyst in the brand retail industry at Analysys, told Burning Finance that a large part of Starbucks' challenge in the Chinese market comes from new local coffee forces. "Affordable coffee and specialty coffee are also the two most rapidly growing segments in the market. Specialty coffee belongs to a small and beautiful market segment, the chaining ability is weak, and the affordable coffee chaining ability is strong, such as the number of Luckin stores can already match Starbucks, and even exceeds the number of Starbucks stores in Chinese mainland. ”
As Li Xinyi said, at this stage of the domestic coffee market, on the one hand, like Luckin, Manner and restaurants as the representative of the cheap coffee, mainly based on the small shop model, its self-pick-up and take-out scenes account for a high proportion, by reducing operating costs and ultra-high cost performance to occupy the market.
On the other hand, the specialty coffee represented by Seesaw and M stand not only works baristas, coffee beans, hand-brewed methods, etc., but also tends to focus on popularizing coffee culture, space design, scene experience, etc., using soft means to enhance brand tonality and cultivate a part of the loyal users.
Photo / A niche specialty coffee source / Burning Finance shot
In addition, there are a large number of cross-border "players" who are also eyeing the coffee track. For example, recently, China Post announced that it officially entered the coffee market, and post office coffee landed in Xiamen Guomao Building. Earlier, new tea brands, including Heytea, Nesher's tea, CoCo, etc., were also exploring innovative coffee categories, and even Tongrentang, which focused on health care, also sold health coffee.
In addition to local coffee brands, foreign coffee chain brands have also set their sights on the cake of the Chinese coffee market and have accelerated their layout in the Chinese market. For example, Tim Hortons, a Canadian chain coffee brand of foreign traditional coffee brands, said after receiving exclusive investment from Tencent that it will open more than 1,500 stores in China in the next few years; Arabica, an internet celebrity coffee from Japan, has also accelerated its layout and has opened more than 40 stores in the Chinese market.
Of course, with the change of domestic consumers' coffee consumption habits, not only has a large number of offline brands emerged, represented by Santo and a Half, Yongpu Coffee, Sumida River, etc., the cutting-edge instant coffee brands that focus on freeze-drying technology have also occupied a place in the coffee market.
For a time, the crowded coffee market gave consumers more choices, whether it was a convenience store downstairs in an office building, a chain of coffee shops in shopping malls, independent coffee shops on the corner, or three and a half meals and Yongpu in the shopping cart, all of which were "competing" for users.
At the moment when the post-90s generation has become the main force of consumption, who can really attract these young consumers in their favor, and who can really go solid and long-term in the Chinese coffee market. "This also brings a lot of challenges to Starbucks." Li Xinyi analyzed that compared with the post-70s and post-80s, the post-90s and post-95s have a lower degree of blind obedience to international big brands, and conversely, the acceptance of local brands is higher and they are more willing to try new.
But at the same time, younger consumers are losing their freshness faster. Therefore, whether it can keep up with consumer demand for rapid iteration of SKUs and whether it can play with social media are new challenges facing Starbucks.
Li Xinyi said that although the two market segments of affordable coffee and specialty coffee will divert some Starbucks users, it is expected that it will be difficult to shake Starbucks' leadership position in the short term, after all, Starbucks's comprehensive strength in brand, supply chain and operation is still the industry leader.
"From another aspect, the popularity of the coffee market may help Starbucks educate many new consumers to seize the incremental market, so we will see that Starbucks is still very resolute in its attitude towards new stores."
Whether Starbucks' position in the Chinese market will be shaken in the future is unknown, but it is certain that China's coffee market is developing rapidly and forming a differentiated competitive pattern, and perhaps the future pattern of the coffee market will no longer be a monopoly.
Reference material:
"Time is running out for Starbucks", source, Tiger Sniff.