Text | hickory
More and more workers are discovering that Starbucks, which once made them feel shy when they paid, is quietly cutting prices.
A number of long-time Starbucks loyal consumers told Caijing Mowgli that they were given a lot of "39.9 two cups" and "49.9 two cups" coupons in their Starbucks card bags. On many e-commerce platforms, Starbucks has also launched discounts such as "106 yuan, 103 yuan/5 cups", and grouping. "On average, a glass is less than 20 yuan, which is definitely not far from 9.9, but it has dropped a lot compared with Starbucks' previous pricing. One consumer commented.
Starbucks vigorously promotes, source: screenshots of social media and e-commerce platforms
On social media platforms such as Xiaohongshu, there have also been many "Starbucks how to buy cheaper" wool teaching posts. Not long ago, Starbucks' annual "Free Coffee on Earth Day" event triggered a queue in many stores.
In the business war of 9.9 yuan for Chinese coffee, the price drop of Starbucks has become an established fact. But not long ago, Howard Schultz, the founder of Starbucks who visited China, once again said bluntly: "[Starbucks] is not interested in joining the price war." This "two-sided attitude" is increasingly manifested in Starbucks' layout of the Chinese market - whether it is to increase the layout of counties or to try to localize products and marketing in China for more than 20 years, Starbucks has been working hard, but it seems to have become the most incomprehensible existence in China.
Double-sided Starbucks, why did it come to this?
1. Starbucks, which has a "hard mouth", secretly lowered its price
In the past year, the "9.9 yuan" low-price strategy, which was first launched by Cudi and followed by Luckin, and then became the basic operation of the industry, has made China's coffee industry a red sea of competition. But unlike the candid attitude of its competitors, Starbucks has always been very "hard-mouthed" in the matter of "price reduction".
Not only the founder Howard Schultz, but also Starbucks China CEO Wang Jingying has repeatedly stated in public: "Starbucks is not interested in getting involved in a price war".
But the financial report data is quietly slapping the face. According to Starbucks China's Q1 financial report for fiscal year 2024, the average order value of Chinese stores in the quarter fell by 9% year-on-year, despite positive growth in overall revenue, same-store sales, and same-store transaction volume. The volume has gone up, but the price is falling. Although Starbucks China has repeatedly emphasized that it is "trying targeted promotions and personalized offers to encourage consumers to increase the frequency of purchases" in response to the "decline in customer unit value", this also shows that Starbucks has actually lowered its price in China.
On the one hand, he said that he did not participate in the price war in the coffee industry, but on the other hand, he actually quietly lowered the price through various promotions and new channels.
First of all, the current consumer market is going through a low-price cycle, and for the beverage industry with relatively high-frequency rigid demand, low prices have become a necessary weapon. In the past year, although the momentum of the "price war" in the coffee industry has slowed down, such as Luckin and other giants have made targeted adjustments to the price strategy, but low prices have obviously become the most direct means of drainage for newcomers in the industry, and the key actions for the elderly to increase the consumption frequency of old customers.
Not long ago, KCOFFEE, a subsidiary of Yum Group, earned a wave of goodwill among consumers through a limited-time event of "9.9". According to the observation of "Financial Mowgli", at least on the marketing and product side, players such as Cudi and Luckin have not stopped emphasizing the "low-price strategy", but the players' gameplay and actions on "price reduction" are more diverse and hidden, which is manifested in the following two points:
• On the product side, there are more and more "combined price reductions". Coffee players are good at driving the sales of products with different gradients through the combined promotion of "star products + other products".
• On the marketing side, by matching the typical brand activities of the enterprise, the "price reduction" packaging becomes a kind of brand value promotion. Typical examples include MANNER's "Coffee Giveaway" campaign and Starbucks' "Free Coffee on Earth Day" campaign.
MANNER's "Give a Cup" campaign and Starbucks' "Free Coffee on Earth Day", Source: Brand Official Account
Secondly, the low-price subsidy war between online e-commerce and local life giants has also brought east wind to Starbucks' "low price".
In its earnings report last quarter, Starbucks specifically mentioned the continued growth of its digital business (StarDelivery and Coffee). Starbucks China has been on Douyin for many years, and at present, the official account has more than 5 million followers. As early as 2021, according to media reports, Starbucks China's live broadcast GMV exceeded 12 million, making it the "head echelon" of the Douyin coffee industry.
According to the "Douyin Group Buying National Weekly List", in the first three weeks of April this year, Starbucks China ranked 25th/39th/77th respectively.
Starbucks China Douyin live broadcast room, source: Douyin screenshot
Starbucks also cooperated with Meituan Takeaway very early to open up member data, and the cooperation between the two sides is not only in delivery, but also derived from Meituan's live broadcast content. In April last year, Meituan launched its first live broadcast of takeaways, and in June, it launched its first catering 618. In last year's 618 Meituan God Coupon Festival, Starbucks launched a new exclusive product for Meituan Takeaway, relying on the 19.9 yuan Meituan God Coupon to harvest a wave of new customers.
Starbucks participated in the Meituan 618 God Coupon Festival, source: Internet
It can be said that in the competition between Meituan and Douyin in local life, under the official traffic tilt and large subsidies, the giants are fighting, and Starbucks, as the head merchant, is full of dividends.
However, under the above-mentioned external factors, Starbucks' choice to "self-deprecate" is also inseparable from internal factors.
In 2022, Starbucks China released its 2025 China Strategic Vision, in which Starbucks set an aggressive goal of "reaching 9,000 stores in China, doubling net revenue, and quadrupling operating profit", which also forced Starbucks to make more transformation attempts in the Chinese market.
Back to the price strategy, low price is not actually a strategy, low cost is a strategy. Objectively speaking, Starbucks' advantages and disadvantages are actually obvious in the "price war" of China's coffee industry.
At the same time, as Starbucks accelerates the pace of store expansion in the sinking market, it can rely on brand power to obtain relatively small rents, reduce the cost of heavy assets, and share costs evenly with scale advantages to ensure profitability.
But there are also disadvantages. The sequelae of low prices is actually Starbucks' loss of high-end positioning. High-end positioning is the differentiation of the Starbucks brand, but it is also the fundamental reason why it is now "double-sided" in the Chinese market.
2. While sticking to high-end, while currying favor with young people
A person in the coffee industry once mentioned to Caijing Mowgli that the biggest side effect of the price war in the coffee industry in the past year is that "consumers feel that a cup of coffee should be worth 9.9". He further explained that for popular coffee (referring to the middle and low end), such as Cudi, Luckin, and even convenience store coffee, "price for volume" can work. But for a high-end coffee like Starbucks, this is a clear break from its brand positioning.
This is why, when it comes to Chinese consumers, especially the main coffee group - those young consumers who are more receptive to the coffee category, Starbucks has shown its duality: on the one hand, it insists on the high-end Western-style petty bourgeois style, and on the other hand, it has stepped down from the altar and actively curried favor with this generation of Chinese young people.
Changeability is the most obvious characteristic of this generation of Chinese young people. They can not only buy big-name bags, but also rush to grab the rolling paper in the live broadcast room of Pinduoduo, which can not only pay for thousands of healing services, but also travel for special forces. Returning to the coffee industry, if you want to please this group of changeable young people, referring to the practice of coffee players such as Luckin, in fact, it also provides Starbucks with an "open-book answer":
First, in terms of products, on the one hand, we must meet consumers' curiosity through continuous high-frequency innovation, and on the other hand, we need to stabilize our own menus and create coffee drinks with strong liqueur and more suitable for Chinese babies.
Second, in terms of marketing, it is necessary to "be able to play and play", and the old routines of co-branding and private domain operation have been played by Luckin into the standard configuration of the coffee industry.
The third is to consider "how to get closer to consumers" in terms of specific points and urban layout.
Starbucks does the same, but it's very "screwed".
First of all, in terms of products, Starbucks is not without experimenting with localized flavors, and is also improving its own speed of innovation.
In October last year, the "Strong" series, developed by the Starbucks China team and described as "new from the inside out", was seen by the outside world as a signal for Starbucks to increase the size of "milk coffee", and the popularity of the concept of sweeter "milk coffee" came from Starbucks' rival, Luckin's raw coconut latte. Starbucks has also tried to launch "tea and coffee", and has also adapted to the Chinese New Year, such as the "Nianfeng Salty Latte" with braised pork flavor for the Year of the Dragon, but compared with Luckin and other roll kings, there is a gap in speed and reputation, but people's real hit Starbucks is still stuck in the "toffee hazelnut series".
The reason why there are fewer and fewer explosive products out of the circle is that the taste of Starbucks products is twisted. Starbucks is indeed trying to cater to the tastes of Chinese, but it wants too much in specific product development.
For example, in the category of "tea and coffee", the first issue of the Starbucks special star delivery series launched by Starbucks in 2023 is tea and coffee. But on the one hand, the selling point of the "Time and Space Series" is that it is "born for delivery", and it is an experience card of "takeaway to home = in-store consumption". On the other hand, from the perspective of product taste, the osmanthus flavored Tieguanyin latte and black plum hawthorn black tea American style were superimposed with ingredients such as "famous tea + fruit + milk flavor", but from the actual effect, the desired result was not achieved.
Another example of this is "sake coffee". In fact, Starbucks launched "Liquor Coffee" in 2020 - Selected Whiskey Cask Coffee, but the "Liquor Coffee" really detonated in the public circle and mentioned the "Sauce Latte" co-branded by Luckin and Moutai.
In addition to the entanglement of product ideas, in terms of marketing thinking, although Starbucks is trying to please young people, its marketing cannot impress young people. For example, Starbucks is also taking the initiative to follow up on the cross-border co-branding that domestic coffee brands are already familiar with. Last year, Starbucks China co-branded with "Havoc in Heaven", and specially launched a new product "Frozen Latte" and a series of peripherals, which is also the first time that Starbucks has co-branded drinks with a local IP in China.
Recent co-branding cases of different coffee brands, Source: Brand Social Media
However, judging from the IP attribute alone, Starbucks' current actions show that the innovative ideas are relatively conservative. Compared with the cross-industry and cross-category co-branding of domestic players, to a certain extent, Starbucks drinking the "Havoc in the Heavenly Palace" co-branding is a choice that cannot be mistaken, but it does not produce more circle-breaking effects.
At the same time, in terms of channels, Starbucks is also actively exploring its "third place" to the county seat. In the last quarter's earnings call, Wang Jingying revealed that as of the last quarter, Starbucks had covered 857 of the 3,000 cities above the county level, and 27 new cities had been settled, of which more than seven new stores had become fifth-tier cities.
Starbucks China vs Luckin, source: Narrow Door Catering
The county seat is the next wrestling ground for coffee giants. According to the data of "Narrow Door Catering", as of now, the number of Starbucks stores in fourth- and fifth-tier cities and below accounts for about 5.5%, and Luckin accounts for about 16%, Starbucks is far behind domestic players, which is undoubtedly a protracted battle for Starbucks with stores concentrated in first- and second-tier cities.
3. After 25 years in China, why is the more unfortunate you are?
Since Starbucks officially opened stores in China in 1999, Starbucks' 25-year "China Practice" has confirmed the saying: the harder you work, the more unfortunate you are.
On the one hand, they are trying to localize their homework, but on the other hand, they seem to understand China more and more.
Essentially, Starbucks overestimated the growth of the inherent model of "high unit price + strong space + Western style" in the Chinese coffee market, and this model is not without room for growth, but their expectations are too high.
The chain coffee brand represented by Starbucks has verified two simple laws in the process of passing through the consumption cycle in the past, which is also the consensus of the entire coffee industry history:
The first consensus is a homogeneous undertone. As the development of the industry enters the middle and late stages, the homogeneous competition of the coffee industry category will become higher and higher. Especially with the maturity of coffee consumption habits, the competition in store categories is more concentrated on traditional items with higher coffee content. It is inevitable that the pace of taste innovation in a woman's store will gradually slow down.
And this will lead to an ending: the difference between the products of chain coffee brands will become smaller with the passage of time, and no brand can monopolize a single product, and Luckin's past "coffee milk tea" has confirmed the above law.
The second consensus is the stratification of coffee demand. In the long run, consumer demand for coffee will eventually be divided into the following three categories –
The first is functional demand, low requirements for taste, price sensitivity, and low brand loyalty, such as 9.9 cups of American, consumers drink Luckin, lucky coffee or convenience store coffee, there is no difference in nature;
This long-term "big consensus" gave birth to the global coffee giant Starbucks, but the Chinese coffee market also has its own small consensus, which is the difference in versatility and uniqueness, which happens to be where Starbucks needs to step up to catch up and learn.
The "mini-consensus" is reflected in two aspects:
The first is genes, Chinese coffee does not have the historical gene of taste, so it is destined for coffee giants to assume the role of market educators. The emergence of Luckin has undoubtedly raised the competition, but it cannot simply be said that the current Chinese coffee market has "oversupplied", and there is still room for demand to be tapped.
The second is competition. Starbucks' biggest rival, Luckin, to a certain extent, rose from the mass market ignored by Starbucks, superimposed on the development of China's mobile Internet, and this part of the population brought traffic dividends to Luckin and laid the foundation for its subsequent scale effect, which is why Luckin entered the "10,000-store era" earlier than Starbucks in a short period of time.
In the short term, Starbucks' aggressive goal will continue to roll in the Chinese market. At this stage, more Chinese coffee brands are looking for more models, more methods, and more attempts, and Starbucks' practice confirms this, and there will still be new players and new imaginations in this industry in the future.
Resources:
1. Guojin Securities: The Supply of the Apocalypse of the Japanese Coffee Industry - Competition and Endgame of Chain Coffee