Authentic Starbucks, drink and cherish it. Because Starbucks' operating model in China may need to change.
Hello everyone, I am Xiaohe. Welcome to this episode of Consumer Reference.
On November 21st, according to media reports, Starbucks is studying options for its China business, including the possibility of selling equity. The key is that this company did not directly deny this rumor. We are working hard to find the best growth path, including exploring strategic partnerships, "said a global spokesperson for the company. Note that Starbucks China seems to have no say in this issue.
What's behind it? Starbucks is facing performance pressure in China.
In the third quarter, Starbucks China's revenue was $783.7 million (approximately RMB 5.576 billion), a year-on-year decrease of 7%. Luckin Coffee is 10.181 billion yuan. In addition, same store sales decreased by 14%, while transaction volume and average order value decreased by 6% and 8%, respectively. This is based on Starbucks' growth of 7596 stores in China.
Why is that?
The Chinese market has indeed changed, and consumers are more concerned about cost-effectiveness. After Kudi launched the 9.9 yuan price war, it grew rapidly. Even Luckin Coffee's self operated stores saw a year-on-year decline of 13.1% in same store sales.
In addition, given the advantages of China's supply chain, the gap between Luckin Coffee and Kudi's products and Starbucks is far less than the price difference. According to data from Zhaimen Dianyan, Starbucks' average customer price in China is 37.53 yuan, while Luckin Coffee's is 14.98 yuan.
So, is selling Chinese business equity a good deal for Starbucks?
Of course it depends on the price, we don't know yet. Let's talk about strategy.
On the one hand, selling its Chinese business will indeed bring Starbucks some money and also shake off growth pressure. Brian Niccol, the new CEO, is not satisfied with Starbucks' operation in the US market, and the US is also declining. Just in time to focus on organizing the US market.
Meanwhile, the operation of Chinese capital may not necessarily be poor. McDonald's, Domino's, and Subway are all operated by Chinese teams.
But what sets Starbucks apart is that it is a company with faith. If we switch to a new operator, will Starbucks' culture still exist? Once in winter, a Starbucks employee drew a picture for me asking me to take care of my health. This feeling is great.
Starbucks needs to make a decision between ideals and reality.