Former Ali female executives, Starbucks heavily deployed the Chinese market

When the Chinese coffee market is still in the sauce, Starbucks quietly changes its blood.

In the recent official announcement, Starbucks founder Ward Schultz withdrew from the company's board of directors, and Zhang Wei, former president of Alibaba Pictures, became the new board member, and will officially become the eighth director of Starbucks from October 1.

It is worth noting that Zhang Wei, born in 1970, has interviewed business celebrities as a CCTV host, such as Son Masayoshi and Lee Kaifu. She then served as an Alibaba executive and president of Alibaba Pictures. Zhang Wei has an eye-catching resume, in addition to Ali, he has also worked for well-known companies such as General Electric, Bain Capital, and Ralph Lauren.

As the soul of Starbucks, Schultz's third tenure as Starbucks CEO ended in March this year, and former Procter & Gamble CEO Laxman Narasimhan took over, and now Schultz has completely retired and turned his career focus to philanthropy and venture capital. The industry believes that the board successor he has found for himself, Zhang Wei, shows his strategic positioning - Starbucks' future in the Chinese market.

On September 18, there was also a change in the top management of Starbucks China, and Liu Wenjuan was appointed Executive Vice President and Co-CEO of Starbucks China, effective October 2, 2023, and she will lead Starbucks China's business together with Jingying Wang, Chairman and CEO of Starbucks China. As the head of Starbucks' digital innovation business, Liu Wenjuan launched digital businesses such as "Special Star Delivery" and "Coffee Express", which became a new growth driver for Starbucks in China.

At present, Starbucks is losing its absolute leading position in the Chinese market. Is Starbucks' frequent personnel changes related to this? In the face of a completely different competitive situation, how does Starbucks face it?

Former Ali female executive, joined Starbucks

Why Zhang Wei?

For this new colleague, Hobbs, a current member of Starbucks' board of directors, commented that Zhang Wei is recognized by the industry as an innovator and changer, and her rich experience, broad perspective and dedication to the company's business development will help Starbucks continue to grow. Nashan, the current CEO of Starbucks, agrees that Zhang Wei will bring significant experience in global operations, consumer technology, entertainment and enterprise business development to the Starbucks board.

Born in Shanghai in 1970, Zhang Wei went to the United States to study in high school, studied finance and business management at Seton Hill University in Pennsylvania, and later earned an MBA from Harvard Business School. The Harvard Business School experience has allowed her to change her introverted and shy personality and cultivate excellent expression skills. Therefore, in the first half of her career, Zhang Wei was deeply engaged in the media industry, and served as the host of CCTV's "Dialogue" program, the host of the "Brainstorm" and "Decision" columns of the First Financial Channel, and talked to heavyweights in the financial circles at home and abroad. At that time, she was called "the only female host in the mainland with an MBA degree from Harvard". She evaluates her hosting style as responsive and witty.

During her hosting period, she did not stray from business, having worked for media tycoon Murdoch's Star Media, as the director of operations of Star Media China, and also held senior positions in famous consulting firms Bain Capital and General Electric.

Since 2008, Zhang Wei has joined Alibaba as Senior Vice President and Head of Strategic Investment. Since 2015, he has served as the president of Alibaba Pictures, responsible for overseas business and investment and mergers and acquisitions. During Zhang Wei's tenure, Alibaba Pictures cast the Oscar-winning "Green Book" overseas, which is regarded as a successful operation of Chinese Internet film and television companies joining hands with Hollywood, and it is also a wonderful stroke on his resume.

It is reported that Zhang Wei has been a board member of the Los Angeles Sports and Recreation Commission, the Jack Ma Foundation and other institutions, and is currently a board member of Ralph Lauren Company. In addition, the US website Business Insider listed her as one of the "100 people who changed business", and she also received the "Entertainment Industry Changemaker Award" from the Rockefeller family foundation.

Overall, Starbucks chose Zhang Wei because of his global background and cross-border capabilities, as well as his deep background in overseas mergers and acquisitions and media. Regarding joining Starbucks, Zhang Wei said: "Starbucks' limitless growth mindset is impressive and resonates with me, and I have been a Starbucks customer worldwide for decades. I am honored to have the opportunity to work with a talented team of leaders to contribute to the Starbucks business and brand and create significant value." ”

Starbucks "defeated" by Luckin?

The industry generally believes that Zhang Wei's addition reflects Starbucks' further emphasis on the Chinese market.

Since opening its first store in Beijing Guomao in 1999, Starbucks has always led the Chinese market. The coffee culture and third space it defines are deeply rooted in the Chinese coffee market. Until the past two years, the coffee war launched by Luckin and other Chinese challengers, with a low-price strategy, quickly popularized coffee to the sinking market, and also announced a new definition of coffee - more and more milk tea coffee is no longer a luxury, but a daily drink.

This differentiated positioning allowed Luckin to quickly break free from the capital fraud scandal and quickly establish 10,000 stores across the country. In just 5 years, the number of stores in the Chinese market has surpassed Starbucks, which has been cultivating here for 24 years, and has become the first coffee company with a scale of 10,000 stores. In its strategy released last year, Starbucks targeted 9,000 stores in China by 2025, and it currently has nearly 6,500 stores in China.

However, it is not fair to simply compare the speed and number of stores opened by Starbucks and Luckin, after all, the gold content of the two store types is different. Starbucks is mainly large-scale stores in urban centers and on the first floor of shopping malls, while Luckin Coffee mainly focuses on small-scale takeaway stores that go deep into office buildings and community stores. Moreover, Starbucks insists on direct management, and more than 30% of Luckin's 10,000 stores are franchised.

According to the statistics of Extreme Sea and Bright Company, Starbucks stores are more stable than Luckin, especially in the number of store closures, in the past 90 days, Luckin has closed 109 stores, while Starbucks China has 5.

What really makes the market face up to Luckin's power is that even in the period of rapid expansion, it can fight Starbucks in terms of operational efficiency.

From the latest second-quarter financial report, Luckin has surpassed Starbucks in terms of single-quarter turnover and operating profit - Luckin's revenue is 6.2 billion yuan, and the operating profit margin is 18.9%; Starbucks generated revenue of RMB5.9 billion in China and a global operating margin of 17.3%. In the Chinese coffee market, this is a historic moment – Starbucks' position has been challenged for many years.

Selling at a lower price but with a higher profit margin, Luckin is indeed an "excellent student" in terms of operational efficiency. At first, the market's concern for Luckin was whether the subsidy could be sustained, but this was becoming its long-term strategy. Faced with Kudi's hand-to-hand fight of 8.8 yuan, Luckin Luckin faced it with 9.9 yuan of coffee a week - and said it would last at least two years.

No one knows if this is a watershed. But in the face of the more intense coffee war, Starbucks still seems to want to remain elegant.

The coffee market is diverging at an accelerated pace

The Starbucks "unlimited growth" value mentioned by Zhang Wei comes from founder Schultz. He went in and out of Starbucks three times, coming to put out fires every time it "veered off." And when he officially resigned this year, he said Starbucks was in a good position and "I don't need to come back."

His confidence in Starbucks is that Starbucks is vastly different from other brands. "I want to be as humble as possible, but I don't spend a lot of time paying attention to what my competitors are doing, because fate is in my own hands."

Starbucks China Chairman and CEO Wang Jingying also responded to China's coffee price war that competition had no significant impact on Starbucks' third-quarter performance, and stressed that Starbucks is "playing the long-term game."

In the face of the Chinese market, where coffee upstarts such as sauce coffee and rice milk coffee are fighting, Starbucks tries its best to maintain the elegance of "old money". When the single-digit coffee price war begins, Starbucks is not in a hurry to end, and occasionally "buy one get one free" on e-commerce platforms, which is also a lot more expensive than Luckin.

One of the reasons why Starbucks is calm is that the cake is still growing.

Nashan, the current CEO of Starbucks, has said that American customers drink an average of 380 cups of coffee a year, and Chinese consumers drink an average of 12 cups of coffee a year, and "we are still in the early stages of development in China."

Behind the rapid growth of Luckin and Starbucks, the space of the Chinese coffee market is large enough and the ceiling is high. In addition to them, there is plenty of room for players such as Kudi, Lucky Coffee, and Manner.

Therefore, Luckin is not exactly an opponent for Starbucks, on the contrary, it is its continuous coffee hot events, such as raw coconut lattes, sauce lattes, etc. continue to stir people's nerves, so that the coffee market is constantly being reclaimed and deepened.

When Luckin pioneered the streets of small towns, the coffee concept became popular, and Starbucks, although belated, moved quickly. It aspires to become the "county standard", with an average of one landing in nearly 3,000 small cities in China every 9 hours. The county market, which has been fully educated by Luckin, has made the emergence of Starbucks no longer contradictory. It is more like the office of white-collar workers in first- and second-tier cities, and in the sinking market, it is becoming a shopping transit point for people to gather, nag and share gossip. What's more, there are young people who have returned to their hometowns to start businesses and freelance jobs who are happy to patronize its business.

While laying out the sinking market, Starbucks China is accelerating the construction of a solid "big rear": investing 1.5 billion yuan to build an industrial park in Kunshan, complementing the integrated local supply chain for all stores in China; Established the Starbucks China Innovation and Technology Center in Shenzhen to build its digital weapon for future competition.

On the other hand, in the increasingly fragmented coffee market, Starbucks occupies favorable terrain.

The geographical overlap of coffee brands has not eliminated the difference between the two in terms of scene and crowd. The two sides of Starbucks and Luckin can't or don't want to understand each other's context. Starbucks consumers are ridiculed as "leeks" by some Luckin consumers, while Starbucks consumers believe that the two are not on the same level - "if business people definitely choose Starbucks." ”

After all, Luckin and Starbucks are really not on the same "channel" now, and there is no need for Starbucks to cut prices too much in a short period of time.

From the perspective of low price and scale attribute model, Luckin needs to fight with Coudy and Lucky Coffee first. In less than a year, the number of Kudi stores nationwide has exceeded 4,500, and the number of lucky cafes has exceeded 2,000; From the perspective of brand premium and space attributes, Starbucks faces more direct competitors should be scenario-based brands such as M Stand and Tims Coffee.

"Starbucks panicked I don't know, Luckin was panicked by Coudy." Someone teased. Therefore, instead of running to tell "Luckin defeated Starbucks", it is better to wait for it to change, and the new war for coffee may have just begun. In other words, the more brands are fighting and the more merchants are rolled, the more consumers can enjoy higher quality coffee at a lower price.