"15 yuan off for 70 yuan", "3 cups of 55.9 yuan", "2 cups of 45.9 yuan"...... In the Starbucks card bag of Xiaoqi (pseudonym) born in the 90s, there are many coupons, so that the unit price of coffee that is more than 30 yuan is as low as 20 yuan.
Starbucks, which has repeatedly said that it has "no interest in price wars" and declared that it wants to take the high-end route, is now quietly discounted?
"3 yuan to drink Starbucks"?
Howard Schultz, the founder of Starbucks, who just came to China in March this year, said that he was "not interested in a price war", and the aftermath of "9 pieces of 9 wind finally swept up to Starbucks" appeared on the hot search.
On social platforms, "half-price Starbucks wool" and "3 yuan Starbucks drink" and other "ultimate money-saving version" strategies have become topics of keen discussion among netizens. In the perception of many consumers, it is not difficult to buy low-cost Starbucks coffee nowadays.
According to Chinanews.com, "These offers have been pushed for a long time. Xiaoqi said that the "group coffee" campaign was launched in 2023, and the coupon campaign has been around for at least 2023.
Starbucks Promotions. Screenshot from the online platform.
In this regard, Wang Jingying, chairman and CEO of Starbucks China, explained that the main reason for the decrease in the unit value of customers is the personalized preferential promotions launched by Starbucks China to increase the frequency of consumers' purchases. "This allows us to optimize sales and profits. This means that "price for volume" has gradually become a reality for Starbucks in the Chinese market.
Revenue, earnings, etc. fell short of expectations
Shares plunged nearly 12% in after-hours hours
On the morning of May 1, Beijing time, Starbucks (SBUX. US) announced its fiscal second-quarter results.
Starbucks' second-quarter 2024 earnings report showed that the company's revenue, earnings and same-store sales growth fell short of market expectations due to the reduction in customer frequency and order size. CEO Laxman Narasimhan called the current "challenging environment" on the earnings call, citing macroeconomic headwinds and consumer pressures as key challenges.
According to the financial report, second-quarter revenue fell 2% year-over-year to $8.6 billion, and adjusted earnings per share fell 8% to $0.68. Same-store sales were down 4% year-over-year and transaction volume was down 6% year-over-year, which was not fully offset by a 2% increase in average spend. As a result, Starbucks shares fell sharply after hours, falling nearly 12% as of press time.
In an effort to boost sales, Starbucks tried a series of new strategies, including afternoon sales and the launch of new products such as lavender lattes, but the results showed that these initiatives did not significantly improve performance. The company's same-store sales in North America fell 3%, and footfall and ticket value also showed varying degrees.
Internationally, Starbucks also faced challenges, particularly in China, where same-store sales fell sharply by 11%. Narasimhan explained the trend on the call, noting that it was largely impacted by occasional customer declines, changes in holiday patterns, and the normalization of customer behavior following the reopening of the market last year.
In light of these challenges, Starbucks has revised its growth forecast for 2024 for the third time. The company now expects global revenue growth to be in the low single digits, well below its previous forecast range of 7% to 10%. At the same time, global and U.S. same-store sales are expected to decline or be flat in the low single digits, while same-store sales in China are expected to decline by a single digit.
Starbucks' adjusted earnings per share, revenue and same-store sales growth fell short of expectations compared to previous Wall Street estimates.
118 new stores were added to the Chinese market
The total number of members exceeds 127 million
However, same-store sales in China fell sharply by 11%. But Starbucks' performance in China is still remarkable.
Narasimhan said the China team achieved sequential margin growth in the face of revenue pressure. The single-store business performed healthy and profitable, with all stores, including new stores, continuing to maintain double-digit store operating margins.
According to the financial report, in the sinking market, Starbucks China added 118 net new stores in the second quarter, a year-on-year increase of 14%, and the total number of stores reached 7,093. Newly entered 20 cities, covering nearly 900 county-level cities.
Starbucks' 90-day active membership exceeded 21 million, reaching an all-time high, and the total number of members continued to grow, exceeding 127 million, a record high. Membership sales continued to grow, with the proportion of sales increasing to 75%, a record high. The number of 90-day active members in the sinking market has grown rapidly, reaching a record high, and the membership growth rate has exceeded that of high-tier cities. Membership sales have grown considerably, with sales growth doubling that of high-tier cities, demonstrating huge market potential.
Starbucks China launched a total of 27 new products in the quarter, doubling the number of new products in the previous quarter and tripling the number in the same period last year. The new core espresso, Gold Roast Espresso, was launched nationwide, bringing customers a new choice of "light roast". Breaking through the boundaries of coffee innovation, the Yilanduo series of beverages, which brought a combination of "coffee + olive oil", was successfully launched in the Chinese market at the end of March and achieved a performance that exceeded expectations. The Olive series of beverages will be promoted to nearly 2,500 stores across the country in May to meet more customers.
The in-store breakfast period was strong during the quarter, with sales increasing by more than 50% compared to pre-pandemic levels.
Starbucks will continue to implement the three key elements of its China strategy: to provide more locally relevant coffee innovations, to increase significant technology investments, improve omni-channel capabilities, digitally empower stores, and to further expand new stores in lower-tier markets, especially in new county-level cities, given the strong economics of new stores. "I firmly believe that the Chinese market is full of unlimited opportunities, and Starbucks is confident in the long-term development of the Chinese market. Narasimhan said.
Editor|Duan Lian Du Hengfeng
Proofreading|Wang Yuelong
The daily economic news is synthesized from Chinanews.com, Starbucks financial reports, every economic network, Beijing Youth Daily, public information, etc
National Business Daily