Star­bucks out to re­vive flag­ging for­tunes

China Daily European Weekly - - Business -

China sales fall as world’s largest cof­fee chain faces in­creas­ing chal­lenge from lo­cal brands

re­tailer’s fall­ing sales and reignite in­vestor in­ter­est, Bloomberg re­ported on Sept 24.

“We must in­crease the ve­loc­ity of in­no­va­tion that is rel­e­vant to our cus­tomers, in­spires our part­ners, and is mean­ing­ful to our busi­ness,” John­son said in a memo. “To ac­com­plish this, we are go­ing to make some sig­nif­i­cant changes to how we work as lead­ers in all ar­eas of the com­pany.”

Star­bucks’ fis­cal re­sults for the quar­ter that ended on July 1 show that its global store sales in­creased by 1 per­cent, but China store sales de­creased by 2 per­cent.

The world’s largest cof­fee chain hosted its first-ever China In­vestor Day in Shang­hai on May 16, at which the com­pany an­nounced plans to build 600 ad­di­tional stores an­nu­ally over the next five years in China — a goal that will dou­ble the store count from the end of 2017 to 6,000 in 230 cities by 2022.

Star­bucks China launched its de­liv­ery ser­vices on Sept 19 in Beijing and Shang­hai. It plans to ex­pand such ser­vices to more than 2,000 stores in 30 cities in the coun­try by the end of the year. More than half of its cur­rent Star­bucks stores in China will be cov­ered by then.

“Star­bucks De­liv­ers” is the first de­liv­ery ser­vice of­fered by Star­bucks glob­ally. It will be avail­able through both the Star­bucks and Ele.me apps. The de­liv­ery fee for each or­der will be 9 yuan ($1.30; 1.10 euros; £1).

Star­bucks, which has the ma­jor­ity of the cof­fee chain mar­ket in China, has faced mount­ing chal­lenges from emerg­ing lo­cal cof­fee brands that have of­fered de­liv­ery ser­vices. Luckin Cof­fee has opened 1,100 stores and has free de­liv­ery for items priced above 35 yuan, or 6 yuan for each or­der un­der 35 yuan.

Cristina Wang, a se­nior man­ager at a ma­jor tourism ser­vice provider in Beijing’s cen­tral busi­ness dis­trict, says she is look­ing for­ward to try­ing Star­bucks’ de­liv­ery ser­vice but will keep most of her pur­chases in stores, since she be­lieves the de­liv­ery fee is quite high if or­ders are placed on a daily ba­sis. “Star­bucks cof­fee is al­ready pricey com­pared with other brands,” says Wang. “Adding 9 yuan for each or­der only makes it even more un­af­ford­able.”

Zhu Dan­peng, an in­de­pen­dent an­a­lyst spe­cial­iz­ing in the food and bev­er­age sec­tor, says, “Though the new de­liv­ery ser­vices will help Star­bucks to catch up with peers in the de­liv­ery sec­tor, its core com­pe­tence could be weak­ened by its pricey de­liv­ery fee.”

GETTY IMAGES

Star­bucks Corp em­ploy­ees pre­pare cof­fee at a news con­fer­ence in Shang­hai on Aug 2. Star­bucks is join­ing forces with Alibaba Group Hold­ing Ltd to be­gin de­liv­er­ing its drinks and baked goods in China, rolling out an ef­fort to stave off com­peti­tors and turn around sales in the coun­try.

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