Starbucks has had a tough time in China recently. The company has been outsmarted in growth by its Chinese competition while a struggling Chinese economy has dealt a double blow. As China recovers, its consumers will be more likely to pay more for premium coffee. That’s where Starbucks’ recent hiring, the new Chief Growth Officer for China, comes in.
Starbucks is a Seattle-based coffeehouse chain that is known for its premium coffee, offering a taste and an experience unmatched by any other coffee chain. It wouldn’t be wrong to say that Starbucks revolutionized the consumption of coffee among the general public. It became the go-to place for people traveling to work in the morning, while those looking to have a quick chat with friends didn’t hesitate to sit down at a nearby Starbucks to discuss work or life.
The coffee experience that the brand offered came at a financial cost to consumers, but many didn’t hesitate to dish out more money. However, as the economy stumbled post-Covid, the American consumer weakened, affecting the company negatively. The same problem happened in China, only in a worse way as cut-throat competition meant Starbucks, unlike in the US, wasn’t the coffeehouse of choice for consumers anymore.
Starbucks net revenue in China peaked at $3.67 billion in 2021. Since then, it has stagnated at just over $3 billion per year. Last year, Luckin Coffee overtook the company in China sales for the first time ever and doesn’t plan to slow down. It has amassed over 20,000 stores in China now, with Starbucks well behind at just 7,600 stores. Just to get an understanding of how tough the competition is in China, Cotti Coffee, which was only established in 2022, already has almost the same number of stores in China.
Three years of stagnant revenue have finally prompted the company to bring in someone to solve its China problem. That someone is Tony Yang, a former executive at EV maker Jiyue Auto. He needs to figure out a way to sell coffee in China at the same premium price, as a cost-cutting strategy is only going to worsen the problems for SBUX. To increase the appeal of Starbucks coffee, Tony Yang will help collaborate with China’s po-culture franchises, in a bid to improve its own image in the Chinese market.
The job is easier said than done. But now that the company has a dedicated executive trying to figure out a solution to its China problem, the coming year for the company will be worth watching.
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Disclosure: None. This article was originally published at Insider Monkey.
