Let me be perfectly clear here. I will buy a Chinese EV car (cause they're half the price) but I refuse to drink their coffee. Actually. I don't drink coffee...I do love Starbucks Mocha Lattes. Is that coffee?
A double shot of disappointment
ChartR
The world’s largest coffee chain is losing customers. This week, Starbucks reported that profits (earnings per share) fell by 25% in the last year, driven by a major slowdown in the US. In short, Americans went to Starbucks a lot less but paid more when they got there: comparable US transaction volumes fell 10% in the quarter, but were offset by a 4% rise in the average ticket size (for a net fall of ~6%).
That’s a bitter brew to swallow for new CEO Brian Niccol, who only started in September, as he works to implement his “Back to Starbucks” strategy, which includes reestablishing Starbucks as “the community coffeehouse.”
But the problems in the American business look relatively mild compared to China — a market where Starbucks has spent billions of dollars opening more than 7,000 restaurants in the last 2.5 decades. There, sales are almost in free fall. Per Starbucks:
“China comparable store sales declined 14%, driven by an 8% decline in average ticket compounded by a 6% decline in comparable transactions, weighed down by intensified competition and a soft macro environment that impacted consumer spending.”
Unlike in the US, then, there’s a double shot of disappointment for the coffee giant in China: people are going to Starbucks less and spending less when they get there.
So, what’s hurting Starbucks in the Chinese market? A formidable, home-grown competitor called Luckin Coffee.
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