Recently, some consumers have expressed that they can also enjoy Starbucks for 9.9 yuan. A reporter from First Financial News saw on some social media platforms that some consumers posted Starbucks products with a payment price of two cups ranging from 18 to 19.9 yuan.
Has Starbucks really joined the price war?
On June 14th, Starbucks officials told First Financial reporters that the company did not participate in a price war. The extremely low-priced products purchased by netizens were stacked with multiple platform discounts, not brand behavior. Most consumers cannot buy products at the extreme price. Of course, brands also offer limited time discounts on seasonal and specific products by campaign, which are not long-term prices for all products.
Starbucks officially launched a "Student Card" promotion in April, which requires the binding of student information on the Student Information Network. Full time undergraduate, graduate, and doctoral students can enjoy the discount. This offer includes a monthly single purchase of 30 yuan or more to receive a Chinese Cup American coupon, a monthly coupon starting from the following month, and a 19.9 yuan Star Ice Music coupon for the first card opening.
Although Starbucks has not launched ultra-low price products through its official channels, it has indeed increased its efforts to give away coupons since the beginning of this year. Starbucks China CEO Wang Jingying stated in her 2024 Q1 financial report that there has indeed been more promotion, but her strategy of not participating in price wars has not changed.
The reporter from First Financial News noticed that there are often many "good gift vouchers" appearing in Starbucks mini programs, such as a discount of 6 yuan for orders over 50 yuan, a three cup discount of 49.9%, a double cup discount of 39.9%, and a single cup discount of 70%. In addition, Starbucks Tiktok Studio also launched tickets for three cups at 69.7 yuan, double cups at 34.9 yuan and designated drinks at 14.9 yuan. That is to say, on the official channels of Starbucks, you can also buy products for 15-25 yuan per cup using coupons.
Food and beverage industry operator Chen Xiaolong analyzed to First Financial reporters that Starbucks' single cup price of 15-25 yuan does not count as joining the coffee industry price war. "Starbucks was forced to lower prices, not a price war. Perhaps Starbucks currently does not have an effective way to deal with Chinese style internal competition. In fact, a better approach is to maintain the original price and promote a high cost-effective product, which should be comparable to the prices of other competitors in the same class."
When Starbucks founder Howard Schultz visited China in March this year, he also made it clear: "We are not engaged in a discount or price war. Our business is based on communities, creating cultural connections with coffee. I love today's competition, and I have seen this all over the world."
The reason for choosing a more compromise approach is that Starbucks faces considerable pressure in the Chinese market.
In the first quarter of 2024, Starbucks China's same store sales increased by 10% year-on-year, but the unit price per customer decreased by 9% year-on-year. Wang Jingying once explained that the main reason for the decrease in unit price is the personalized promotional activities launched by Starbucks China to increase consumer purchasing frequency. "This enables us to optimize sales and profits."
In 2023, from Luckin Coffee's 9.9 yuan per cup to Kudi Coffee's 8.8 yuan per cup, chain coffee brands once again used price wars to further educate the market, but also further intensified industry competition.
At present, it seems that the price war for coffee has not ended so quickly. Recently, Li Yingbo, Chief Strategy Officer of Kudi Coffee, revealed that the company is prepared for a three-year "9.9 yuan promotion". He stated that the company aims to cultivate China's coffee consumption market and provide reasonable returns to its partners through two-way subsidies to clients and partners.
Against this backdrop, Starbucks still insists on not joining this price war. As Howard Schultz said, "Competition is making millions of people aware of coffee. Over time, as customers become more familiar with coffee, they will want to upgrade from low-end or discounted products. As long as we continue to earn market respect, they will choose to upgrade to Starbucks."
Moderate price reduction may be the optimal solution for Starbucks at present. Recently, the "2024 Coffee Market Trend Insight Report" jointly released by Carmen and Meituan showed that in 2023, the price range of 15 yuan to 20 yuan was the highest proportion of SKU sales, followed by 20 yuan to 25 yuan. Overall, sales below 20 yuan account for nearly 60%, and coffee consumption is becoming more popular.