Starbucks Floundering In China As Locals Seek Out Cheaper Alternatives

Starbucks opened its first shop in China in 1999 and rode high for a long time as consumers there sought out international brands. However, the company’s fortunes have faltered in recent times.

A New York Times report from inside China has revealed exactly why the company’s CEO, Brain Niccol, called competition “extreme” in the country as he was asked about stagnating sales.

The report states that Chinese consumers are now favouring home-grown brands that have diversified their offerings to compete with the likes of Starbucks. The newspaper pointed to one such brand, Luckin Coffee, which is reportedly opening a new store every hour. It has nearly three times as many stores now as Starbucks and therefore earns a lot more revenue in the country than its US competitor.

“Today, consumers are less interested in foreign brands, more cost conscious and enticed by local rivals that are popping up on corners all around the country offering something a little different” says the newspaper report. This is part of a wider trend among particularly younger Chinese citizens called guochao, or Chinese fad which has seen them move away from foreign brands. As a potential trade war looms with US President Elect, Donald Trump, this trend could become more pronounced; and could hit more than coffee.