STARBUCKS has confirmed a major change coming to over 6,500 of its locations.
Fans in the US think the overseas changes could make their way over here.
Coffee competition is growing for Starbucks, and in China, the chain is making major moves to combat this.
The coffee giant has announced that it is lowering the prices of its items in the country.
Its part of Starbucks‘ strategy to draw in more customers and beat its rivals.
A source close to Starbucks, who requested anonymity, said: “Starbucks likely has a longer-term strategy, which is to focus on the demand for non-coffee items in the afternoon among consumers.”
Starbucks is set to lower the prices of some of its iced drinks by an average of of 5 yuan, which equates to $0.70.
Some drinks will be priced as low as 23 yuan, which comes to $3.20.
This might sound low, but rivals in China have often beaten Starbucks when it comes to price.
Chains like Luckin Coffee and Cotti price their drinks as low as 9.9 yuan or even 8.8 yuan, which comes to $1.38 and $1.24.
Starbucks has a lot riding on the Chinese market, given how invested it is over there.
The market is by far Starbucks‘ largest outside of the US with 7,685 stores as of the end of last year.
Starbucks has previously stated that it would not engage in a price war, but it seems that time is over.
HOT COMPETITION
The rate of competition threatening Starbucks in China is massive, especially given the rise of a new name, Mixue Bingcheng.
In March, The US Sun reported on the rise of the bubble tea emporium, and how it is giving major brands a reason to be worried.
Mixue Bingcheng, which translates to honey snow ice city, over 45,000 spots worldwide, with nearly 90% of those in China.
That month, it became the world’s largest food and beverage chain “by number of stores”.
Mixue is known for its prices, as it sells soft serve for just 1 yuan, or 15 cents, per cone and bubble tea.
Drinks only cost between 30 cents to $1.20.
The company was founded by Zhang Hongchao in 1997.
He was born into a poor family and has a simple strategy: “Let people around the world eat well and drink well for just two American dollars,” he previously told Chinese state media.
Mixue’s unique business model, given that it’s revenue mostly comes from the sale of ingredients including milk, coffee and syrups, and equipment, acts as a threat to a company like Starbucks.
This is because Starbucks runs the majority of its stores directly, so Mixue’s comparative unification gives it a strong advantage.
Kenny Ng Lai-yin, a strategist at Everbright Securities International, said: “As market capacity can be uncertain in the [fresh-drinks] industry, the fact that Mixue can sell raw materials to its own franchisees and have a clear understanding of their demand gives it a lot of agency compared to others.”
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