Good businesses don’t fear competition; they embrace it. The nearest competitors were McDonald’s and Costa Coffee. Starbucks has nearly 3,700 stores in China already and is generating double-digit transaction growth. The Middle Kingdom has long been Starbucks’ (NASDAQ:SBUX) turf as the java giant essentially introduced the cafe culture to China, starting with its first store there 21 years ago. Starbucks is having to defend its marketing strategy in China — and all because of a cat cup. Independent Fast food chains & Bakeries. However, Starbucks' growth in China could still decelerate as the coffee chain market becomes saturated. As of now, Starbucks is growing in China at the rate … “Tim Hortons will need to offer not just something unique that Chinese consumers can’t find at other chains, but also spend heavily on marketing to build awareness of the brand,” said Jason Yu, Shanghai-based general manager of Kantar Worldpanel in Greater China. As coffee becomes more accepted in China, there is going to be room for many competitors… Luckin’s business has little to do with the customer experience and everything to do with. That’s got owners of Starbucks stock worried. It's unclear how much revenue Luckin generates, but it was valued at $2.2 billion after its last funding round in December. In addition to BlackRock, others of Luckin’s backers include Centurium Capital, … It takes a long time to convert that. McDonald’s and Dunkin’ Donuts are the sharks trying take over the coffee business. As of now, Starbucks is growing in China at the rate of 1… Expansion in developing markets – Starbucks has coffeehouses mainly in the US. The owners of Starbucks stock ought to happy about the increased competition. It is so hot at the moment that the chairman of Luckin Coffee, which only launched in October 2017, has reportedly demanded a. from investment banks interested in getting a seat at the table if and when the company goes public. For example, a coffee costs $3 at Luckin, 50 cents cheaper than at Starbucks. Tea place used to be popular in big cities, but recently the industry is shrinking, shops on Beijing streets are mostly closed. But Luckin's growth is tough to ignore since its business model directly targets Starbucks' weaknesses. Last May, Luckin revealed that it had opened over 500 locations across the country in less than nine months since being founded. WEAKNESSES: Improvement that could be done. China’s two biggest coffee chains aren’t the cutthroat competitors the market assumes. Starbucks attributed that recovery to a rapid expansion of its delivery services, which covered about 2,000 of its locations at the end of 2018, the unification of its Chinese regions for better operational efficiency, and new menu items like ice cream coffee drinks. Starbucks competitors are on the rise. For less than two decades, Starbucks was capable of 10, 000 of stores around the … By the end of February, it had hired, Based in Beijing, the homegrown brand has opened 2,000 locations over the past 18 months in 22 Chinese cities. By comparison, Starbucks created its first store in the country two decades ago. All rights reserved. The next competitor comes from North America—Canada to be specific—with Tim Horton’s announcing plans to open 1,500 stores in China. A public offering would give Luckin a lot more capital to fund its expansion against Starbucks, which could cause headaches for the coffee giant. Luckin began working on its IPO in late January. Good businesses don’t fear competition; they embrace it. If that happens, Starbucks' aggressive brick-and-mortar expansion could backfire as its new stores fail to generate positive year-over-year sales growth. Namely the biggest competitor of Starbucks, is other soft drinks / energy drinks / Chinese Tea. The Ascent is The Motley Fool's new personal finance brand devoted to helping you live a richer life. Similar to a brand like Apple, Starbucks has positioned themselves well over the years making their stores a destination spot for trendy coffee-lovers and have garnered immense brand loyalty among their regular customers. Take that to the next level with a two-for-one deal, and the price for a cup of joe drops to $1.50. The company aims to have 6,000 stores in China by fiscal 2022 and anticipates 600 new stores this year. The China market is obviously important for Starbucks: steady revenue increase for 9 years straight, despite the first incline in Q3 2018. It’s earned the right to call itself the country’s preferred coffee destination. That figure likely reached 2,000 at the end of 2018. Unique selling proposition of the company. It is so hot at the moment that the chairman of Luckin Coffee, which only launched in October 2017, has reportedly demanded a $200 million loan from investment banks interested in getting a seat at the table if and when the company goes public. Dunkin - Let’s be clear on this, in the beginning, Dunkin’ Donuts business model wasn’t “right”. Investors may worry that the trade war will wreak havoc on Starbucks Corp.’s prospects in China, its second-largest market. Since entering China 20 years ago, Starbucks has become synonymous with innovative partner investments and benefits. Starbucks entered the China market in 1999 when it opened the first store in the China World Trade Building in Beijing. Starbucks currently has over 3,300 stores in China, its second biggest market outside of the United States. Most of its locations offer pick up services and deliveries for online orders. However the increased Americanization of the younger generation has made the Starbucks brand popular angst the market as well, making it a strong force in the competition. But Luckin isn't the only major coffee chain which Starbucks should watch out for -- Gourmet Master's 85°C Bakery Cafe, Coca-Cola's Costa Coffee, McDonald's McCafé, and countless convenience stores are also offering cheaper coffee to Chinese consumers. Starbucks worst nightmare in China—competition from fast-growing start-ups like Luckin Coffee—is coming true. Starbucks' ability to address changing markets is honed by effective and ongoing market research. Trade tension between the U.S and China will hurt sales and empower Starbucks’ competitors in China. Returns as of 12/21/2020. 48 Overall, the expense of building stores and other infrastructure in overseas locations meant that Starbucks global operations were not yet a major contributor to the company’s bottom line. Currently, Starbucks has 4,123 restaurants in China, which is more than Costa Coffee’s 449 restaurants (data only from 2018) [2], McDonald’s 3,300 restaurants [3] … Starbucks says it launched a line of Starbucks brand teas in China in 2010. Starbucks CEO Kevin Johnson isn’t worried about competitors in the fast-growing coffee market in China.He says that competition is actually broadening the addressable market by introducing tea drinking Chinese to coffee. Starbucks Opportunities – External Strategic Factors. It also uses marketing blitzes featuring Chinese celebrities, while Starbucks often shuns traditional or localized ads. Place your order at a Starbucks in China, though, and the damage comes to a whopping 27 yuan (US $4.39). This is a flourishing industry as until now almost the entire population of china was China oriented and made a point to buy local products. See you at the top! "With increased competition, combined with nationalism, and the trade war as a back drop, it is very possible Chinese consumers will boycott McDonald's and Starbucks … For years, Starbucks did business in China with no serious competition, with its closest rivals being McDonald's and Costa Coffee. The rebound in China's comps growth in the fourth quarter allayed some fears about the region's comps turning negative, especially since it faced a tough year-over-year comparison to its 8% growth a year earlier. Competitors of Starbucks in China The business of Starbucks went unchallenged for many years in China. Starbucks has been in China since 1999. Starbucks called the lawsuit a publicity stunt, but it may have dented its reputation with Chinese consumers. There is Costa Coffee from the UK. Trade tension between the U.S and China will hurt sales and empower Starbucks’ competitors in China. Leo is a tech and consumer goods specialist who has covered the crossroads of Wall Street and Silicon Valley since 2012. Over the long-term, SBUX believes it will have more stores in China than it does in the U.S., where it has more than 14,000 stores. This is a flourishing industry as until now almost the entire population of china was China oriented and made a point to buy local products. "With increased competition, combined with nationalism, and the trade war as a back drop, it is very possible Chinese consumers will boycott McDonald's and Starbucks and instead go to … Luckin and Starbucks could stay in their lanes, with the former serving lower-end customers and the latter serving higher-end ones who prefer lingering at its cafes. Much ado has been made of Luckin Coffee‘s incursion into China.. Market data powered by FactSet and Web Financial Group. It takes a long time to convert that. Luckin’s business has little to do with the customer experience and everything to do with low prices, discounting through two-for-one offers, and speedy delivery and takeout. Article printed from InvestorPlace Media, https://investorplace.com/2019/03/will-increased-competition-in-china-affect-starbucks-stock/. Starbucks‟ competitors were not able to compete with the quick development of the Estimate Matrix, China organization. quotes delayed at least 15 minutes, all others at least 20 minutes. It plans to list on the NYSE, in part because the Hong Kong Stock Exchange requires companies that list on it to have three years of operating history. SBUX is well-aware of the competition in the Chinese market. According to Euromonitor, Starbucks commands a whopping 58.6% market share in China. But now homegrown Luckin Coffee, a digitally savvy brand geared to … It’s not going to be easy, since, “Tim Hortons will need to offer not just something unique that Chinese consumers can’t find at other chains, but also spend heavily on marketing to build awareness of the brand,”, Jason Yu, Shanghai-based general manager of, 7 Christmas Stocks to Buy for Happy Holidays, Louis Navellier and the InvestorPlace Research Staff, Matt McCall and the InvestorPlace Research Staff, What Did the Stock Market Do? Source: Starbucks' quarterly reports. Starbucks has been fighting off its competitors for the top spot in coffee. Expected to have 4,500 locations open across China by the end of 2019, Luckin Chairman Lu Zhengyao is severely testing the patience of investment banks. There is CaffeeBebe from South Korea and … The next competitor comes from North America—Canada to be specific—with Tim Horton’s announcing plans to open 1,500 stores in China. There … Namely the biggest competitor of Starbucks, is other soft drinks / energy … For example, a coffee costs $3 at Luckin, 50 cents cheaper than at Starbucks. Starbucks does have some smaller competitors in China. Starbucks stock price target raised to $97 vs. $85 at JP Morgan Dec. 11, 2020 at 7:41 a.m. This is the second largest coffeehouse in the world after Starbucks and the largest in the UK. By Jonathan Maze … Currently, Starbucks has 4,123 restaurants in China, which is more than Costa Coffee’s 449 restaurants (data only from 2018) [2], McDonald’s 3,300 restaurants [3] and Luckin Coffee’s 3,680 … Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. Starbucks Opportunities – External Strategic Factors. By the end of February, it had hired Credit Suisse (NYSE:CS) as one of the banks to take it public; Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) are both advising Luckin, but have yet to be granted a formal role, making them susceptible to the $200 million shakedown. the remedy for almost anything, Starbucks was thriving. , discounting through two-for-one offers, and speedy delivery and takeout. There are 1.3B people in China, and most of them dislike the taste of coffee. Starbucks marketing strategy in China was based on customization in response to diverse Chinese consumer target segmentation. Since our entry into China in 1999, we have been focused on developing a company that is committed to sharing the Starbucks experience with Chinese consumers, “one cup, one person and one neighborhood at a time” while passing on classic coffee culture. However the increased Americanization of the younger generation has made the Starbucks brand popular angst the market as well, making it a strong force in the competition… It plans to open another. Establishing and maintaining a global Starbucks brand does not mean having a global platform or uniform global products. This wouldn't be the first time Starbucks faced PR issues in China -- the state media slammed the company a few years back for charging higher prices in China than in other countries. Starbucks stock, in my opinion, remains a buy. Started in the early 1970's, it hasn't taken long for Starbucks to go from a single storefront to a global phenomenon. His wheelhouse includes cloud, IoT, analytics, telecom, and gaming related businesses. Power of Buyers Luckin is looking to go public with a valuation around $3 billion, putting it on par with Starbucks stock, despite losing $120 million in 2018. At the beginning of 2019, Luckin Coffee had approximately 2,380 locations in China -- compared to the nearly 3,700 Starbucks stores at that time. Establishing and maintaining a global Starbucks brand does not mean having a global platform or uniform global products. 1125 N. Charles St, Baltimore, MD 21201. Starbucks entered the China market in 1999 when it opened the first store in the China World Trade Building in Beijing. It's unlikely that Luckin will topple Starbucks on its own. Since entering China 20 years ago, Starbucks has become synonymous with innovative partner investments and benefits. Good businesses don't fear competition; they embrace it. Starbucks has entered in Chinese market for many years already; it has about 1500 stores in China, including 8,500 shops owned by Starbucks directly and also around 6,500 shops on franchises and licences. As Washington-Beijing tension rises up, there might be a point where anti-Western sentiment and a potential backlash against Starbucks is triggered. SHANGHAI — Here’s one way to compete with Starbucks in coffee: Pay your customers. But the owners of Starbucks stock shouldn’t be worried because the increased competition suggests that the Chinese coffee market is becoming healthier. Starbucks does have some smaller competitors in China. One of those rivals was Luckin Coffee, a rapidly growing chain backed by big investors like private equity firm Centurium Capital and GIC, Singapore's sovereign wealth fund. Iconic Canadian coffee brand Tim Hortons, owned by Restaurant Brands International (NYSE:QSR), which also owns Burger King and Popeyes, opened its first store in China at the end of February. Based in Beijing, the homegrown brand has opened 2,000 locations over the past 18 months in 22 Chinese cities. Starbucks’ most dangerous competitor is just 2 years old Luckin Coffee, which was founded in 2017, is poised to have 4,500 units in China by the end of this year, says RB's The Bottom Line. For years, China was a new market frontier Starbucks. Similar to a brand like Apple, Starbucks has positioned themselves well over … Dec. 18, 2020, China’s Consumer Data Is Signaling a Sell for Nio Stock, 3 Hydrogen Stocks to Buy for the $11 Trillion Breakout, 7 Growth Stocks You Don’t Want to Sleep On, 5 Cheap Stocks With Great-Performing Companies. Luckin's customers can't pay with cash. As coffee becomes more accepted in China, there is going to be room for many competitors, including Luckin. Starbucks‟ competitors were not able to compete with the quick development of the Estimate Matrix, China organization. 1125 N. Charles St, Baltimore, MD 21201. By comparison, Starbucks created its first store in the country two decades ago. But Starbucks beverage product did not reach same success as the stores going. Costa. As Washington-Beijing tension rises up, there might be a point where anti-Western sentiment and a potential backlash against Starbucks is triggered. In addition to BlackRock, others … Starbucks says it launched a line of Starbucks brand teas in China in 2010. Global expansion in emerging economies such as India, China … Luckin also offers special promotions on WeChat, the top mobile messaging app in China with 1.08 billion monthly active users, which locks in customers. Starbucks (NASDAQ:SBUX) is facing increased competition in its extremely important Chinese market. There are 1.3B people in China, and most of them dislike the taste of coffee. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. As of this writing Will Ashworth did not hold a position in any of the aforementioned securities. All rights reserved. Take that to the next level with a two-for-one deal, and the price for a cup of joe drops to $1.50. The Bottom Line on Starbucks Stock. Activities of the company better than competitors. lifting Starbucks stock. Copyright © 2020 InvestorPlace Media, LLC. This makes a small cup of Starbucks coffee over one and a half times the price charged in the US, and the economic equivalent of a reasonable meal in China. The fact that Starbucks' comps recovered as Luckin aggressively expanded suggests that there might be enough room in China for both coffee chains to thrive. Luckin is looking to go public with a valuation around $3 billion, putting it on par with Starbucks stock, Iconic Canadian coffee brand Tim Hortons, owned by, In 2019, it will open 10-20 stores in Shanghai, hoping to become the preferred brand for consumers looking for more than just coffee from their visit. The company aims to have 6,000 stores in China by fiscal 2022 and anticipates 600 new stores this year. Investors may worry that the trade war will wreak havoc on Starbucks Corp.’s prospects in China, its second-largest market. They can only place orders through its mobile app, which gives customers loyalty points; the payments are processed via Tencent's (OTC:TCEHY) WeChat Pay. Starbucks' ability to address changing markets is honed by effective and ongoing market research. By comparison, SBUX has 3,600 stores in more than 150 cities, is increasing the number of stores it opens by almost 20% a quarter, and generally has locations that are significantly bigger than Luckin’s stores. … Luckin Coffee, officially launched in January, … It plans to open another 2,500 in 2019, bringing the total number of cities where it has locations to 40 and making it the largest coffee chain nationwide in terms of stores open and the number of cups of coffee served. The company’s sudden rise has put Starbucks, Luckin and McDonald’s Corp. in a race to build the delivery system best tuned to the frenetic Chinese market. 2020 InvestorPlace Media, LLC. Let's conquer your financial goals together...faster. Its hard to imagine that Luckin - with a blank check to gain market share at any cost - will not harm Starbucks materially in its future Chinese plans. As coffee becomes more accepted in China, there is going to be room for many competitors… Starbucks has been fighting off its competitors for the top spot in coffee. in 2019, bringing the total number of cities where it has locations to 40 and making it the largest coffee chain nationwide in terms of stores open and the number of cups of coffee served. Starbucks Can Push Back Against Luckin Coffee in China, Analyst Says . The real concern isn’t any kind of patriotic boycott but competition … Starbucks currently has over 3,300 stores in China, its second biggest market outside of the United States. The real concern isn’t any kind of patriotic boycott but competition … In 2019, it will open 10-20 stores in Shanghai, hoping to become the preferred brand for consumers looking for more than just coffee from their visit. Since our entry into China in 1999, we have been focused on developing a company that is committed to sharing the Starbucks experience with Chinese consumers, “one cup, one person and one … Started in the early 1970's, it hasn't taken long for Starbucks to go from a single storefront to a global phenomenon. Starbucks still has a bigger presence in China with over 3,500 mainland locations, and wants that figure to hit 6,000 by the end of 2022. Despite this, there is a new upstart on the block. The company is also reportedly in early talks for an IPO in Hong Kong or New York. The Bottom Line on Starbucks Stock. Cumulative Growth of a $10,000 Investment in Stock Advisor, Starbucks Faces a Dangerous Rival in China @themotleyfool #stocks $SBUX $TCEHY $BABA, If You Put $1000 Into Starbucks Stock Last January, Here's How Much You'd Have Now, Starbucks Casually Lays Out a Plan to Dethrone McDonald's, Why Starbucks Stock Rose 12.7% in November, Copyright, Trademark and Patent Information. Activities and resources market sees as the company’s strength. Expansion in developing markets – Starbucks has coffeehouses mainly in the US. Beginning in 2012, Starbucks China Partner-Family Forums have become extraordinary annual events that honor the special role family plays in the lives of Starbucks … Check out the latest Starbucks earnings call transcript. See how their market share in the coffee business is shifting today. 1. Starbucks has meanwhile announced plans to double the number of stores it has in China over the next five years. For comparison, Starbucks didn't offer any viable delivery options in China until it partnered with Alibaba's (NYSE:BABA) Ele.me last August. Chinese coffee chain Luckin Coffee has grown to be Starbucks's main competitor in the nation. Stock Advisor launched in February of 2002. ... It’s heavily focusing on Asian markets, including China. ET by Ciara Linnane Starbucks Corp. stock outperforms competitors on strong trading day Luckin's drinks are generally 20% to 30% cheaper than Starbucks' comparable drinks. The company’s sudden rise has put Starbucks, Luckin and McDonald’s Corp. in a race to build the delivery system best tuned to the frenetic Chinese market. Coffee is not only sold in large chains but it is also sold in … For less than two decades, Starbucks was capable of … Luckin Coffee, an unprofitable start-up offering big giveaways … Luckin began working on its IPO in late January. Beginning in 2012, Starbucks China Partner-Family Forums have become extraordinary annual events that honor the special role family plays in the lives of Starbucks partners, while providing an engaging platform for partners and their loved ones to share their hopes … China was once Starbucks' (NASDAQ:SBUX) hottest growth market, but its Chinese sales hit a brick wall last year as it fell behind the tech curve in deliveries and faced new domestic competitors. In 1950s, … Here's how Starbucks fared in China over the past year: YOY growth in China. Starbucks has meanwhile announced plans to double the number of stores it has in China over the next five years. With 2019 nearing an end, Luckin has … There is Costa Coffee from the UK. Copyright © In London, there were more Starbucks locations than in New York City. Global expansion in emerging economies such as India, China and few regions of Africa can give a great opportunity to the company. Starbucks marketing strategy in China … It’s not going to be easy, since Costa Coffee, and Dunkin’ Brands (NASDAQ:DNKN) also are competing for customers in a country in which just 33% of the population bought a cup of coffee in 2017. Starbucks Corporation (NASDAQ: SBUX)'s aggressive Chinese expansion plans have been hit with some unexpected competition. Costa is planning to have 900 China stores by 2020. Nasdaq SHANGHAI — Here’s one way to compete with Starbucks in coffee: Pay your customers. Starbucks has said growing in China required a lot of tailored marketing, including allowing for the popularity of tea. Starbucks Faces a Dangerous Rival in China | The Motley Fool Starbucks has said growing in China required a lot of tailored marketing, including allowing for the popularity of tea. Costa is planning to have 900 China stores by 2020. Unique resources and low cost resources company have. The China market is obviously important for Starbucks: steady revenue increase for 9 years straight, despite the first incline in Q3 2018. It’s a sign the coffee market is maturing and expanding in China, which ultimately should significantly boost the company’s overall profits. Its hard to imagine that Luckin - with a blank check to gain market share at any cost - will not harm Starbucks materially in its future Chinese plans. Last year Luckin sued Starbucks for anti-competitive practices, and penned an open letter to the company claiming that it leveraged its long-term leases with landlords to block competing coffee chains from opening nearby stores. Starbucks is also an easy target for a nationalist backlash if trade relations between the US and China continue to deteriorate. China was once Starbucks' (NASDAQ:SBUX) hottest growth market, but its Chinese sales hit a brick wall last year as it fell behind the tech curve in deliveries and faced new domestic competitors. Activities that can be avoided for Starbucks In China. Will Increased Competition in China Affect Starbucks Stock? Luckin Coffee, an unprofitable start-up offering big giveaways and aggressive subsidies, burst less … Luckin operates small cafes and kiosks instead of full-sized stores like Starbucks, which significantly reduces its operating expenses. Follow him on Twitter for more updates! Tea place used to be Starbucks 's main competitor in the coffee market... First incline in Q3 2018 marketing strategy in China incline in Q3 2018 reach same success the! Price target raised to $ 1.50 important Chinese market level with a two-for-one deal, the! Streets are mostly closed much ado has been made of Luckin coffee ‘ s incursion China. Cat cup currently has over 3,300 stores in China, its second biggest market outside of the aforementioned.! Beverage product did not reach same success as the stores going business is shifting today response to diverse Chinese target... 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