Or open to join? Starbucks, which does not fight price wars, relents!

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A few days ago, Starbucks released its third-quarter results.

According to data, in the third quarter of fiscal 2024 (April 1 to June 30), Starbucks consolidated net revenue was $9.11 billion, down 1% from a year earlier, while homed net profit was $1.05 billion, down from $1.14 billion in the same period last year.

The data in the Chinese market are not good either. Starbucks China's revenue fell 11 per cent year-on-year to $730 million, comparable store sales fell 14 per cent, average customer unit price and comparable trading volume both fell 7 per cent, according to the data. Among them, the decline in average customer unit prices has continued for three earnings quarters.

During the earnings call, Starbucks CEO Nasheim made it clear that "in the past year, unprecedented store expansion and large-scale price war have taken place in the Chinese market, even at the expense of same-store sales and profitability." it has brought about a significant and permanent change to the market environment. .

In other words, the price war has had a big impact on Starbucks' profits. But even so, Liu Wenjuan, co-chief executive of Starbucks China, pointed out in her latest quarterly results that Starbucks maintained a high degree of restraint to avoid a "price war" in a competitive environment with frequent promotions.

Starbucks, on the other hand, is under more pressure on store size. In July, Ruixing officially announced that the total number of stores exceeded 20,000, and the total number of Kudi stores, which was founded only more than two years ago, is also approaching Starbucks, which has entered China for more than 20 years.

As a result, under pressure, Starbucks has gradually stepped up its store opening this year, and the total number of stores has been on the rise recently, but there is still a big gap from the previously announced goal of "9000 total stores by 2025." Therefore, for the current Starbucks, to improve the speed of store opening is undoubtedly an important issue.

Over the past 25 years, Starbucks has relied on different strategic partnerships to develop its business, such as joint ventures and strategic partners in technology, real estate and supply chains, Nashan said. In the future, Starbucks is in the early stages of exploring strategic partners to enhance its competitive position and accelerate growth and revenue generation. Mr Nathhan's statement seems to imply a more open way of doing business everywhere.

It is understood that Starbucks initially adopted the agency and joint venture model when entering China: Hong Kong, Guangdong and other places are developed by Hong Kong Meixin Group; Jiangsu, Zhejiang and Shanghai are jointly operated by Taiwan Unification Group; and the northern market is operated by Handing Asia Pacific Investment and Sanyuan Group.

It wasn't until 2017 that Starbucks regained control of all its stores from the joint venture, turning all its stores in the domestic market into proprietary stores. However, the size of Starbucks stores has almost doubled to more than 7000 since 2019, but there has been no more meaningful growth.

As a result, some investors have called on Starbucks to open its Chinese business to local operators, just like Starbucks in other countries, in order to speed up store opening and better adapt to the local market environment.

However, Nasihan has no specific response to whether Starbucks will be open to join, franchise, or go back to the old way to expand its territory with other companies in the form of joint ventures. He said it was not clear what form the follow-up cooperation would take and did not give more details of the later stage of the plan.

Picture from: Internet

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