Starbucks, which is experiencing poor performance in China, is accelerating the sale of its equity. The company aims to build partnerships with local corporations through the equity sale while seeking opportunities for a rebound through restructuring its business in China.
According to the Financial Times (FT) on Nov. 11 (local time), Brian Niccol, the CEO of Starbucks, noted that the company is considering selling a minority equity stake in its Chinese business and that this sale is currently receiving 'a lot of interest.' However, he did not mention which potential investors are showing interest in the equity sale.
Starbucks, which entered mainland China in 1999, currently operates 7,758 stores in the country. This is the second-largest scale among Starbucks' global markets. In 2022, Starbucks set a goal to increase the number of stores in China to 9,000 by 2023.
Niccol said, 'Investors see the value of the Starbucks brand and recognize that the coffee market is growing,' adding that 'many people want to be part of the process of growing the number of Starbucks stores from the current 8,000 to 20,000.'
In recent years, Starbucks has struggled in the Chinese market. In 2021, it recorded an all-time high revenue of $3.7 billion (about 5 trillion won) in China, but thereafter, its revenue growth declined, and last year it managed only $3 billion (about 4 trillion won) in revenue, despite an increase in store count.
FT reported that 'local corporations such as Luckin Coffee and Costa Coffee, which feature lower prices, have grown rapidly, and concerns about coffee demand are increasing due to the slowdown in China's economic growth.' In the first quarter of this year, Starbucks' net revenue in China was $740 million (about 1 trillion won), only about 60% of Luckin Coffee's $1.2 billion (about 1.6 trillion won).
One cannot easily give up on the populous Chinese market. Niccol noted during the earnings call in April that 'we are committed to China in the long term, and we see great potential in our future business there,' adding that 'we maintain an open attitude about how to achieve that growth.'
Ultimately, Starbucks, which had adhered to a premium pricing strategy, began to lower prices specifically for its Chinese stores. Starting from the 10th, Starbucks adjusted the prices of dozens of non-coffee menu items, such as frappuccino, iced shaken tea, and tiratte, with prices down by an average of 5 yuan (about 940 won) based on the large size.
Bloomberg reported that 'the American coffee chain is taking a more aggressive approach to recover sales in its second-largest market,' noting that 'it is rare for Starbucks to officially promote price reductions through social media channels.'
Starbucks also announced a strategy to strengthen its non-coffee beverage line aimed at Chinese consumers, who have a developed tea culture. They introduced a new slogan, 'Coffee in the morning, non-coffee in the afternoon,' intending to expand their tea beverage lineup and increase customer traffic after lunch.