Luckin Coffee has come to the doorstep, and the new CEO of Starbucks has made four key decisions.

作者 | Li Xiaoxia

编辑 | Qiao Qian

A week ago, Starbucks has made a preliminary announcement about its underperforming results.

Several core indicators are not satisfactory: The net income in the fourth quarter was 9.1 billion US dollars, with a 3% year-on-year decline, and same-store sales dropped by 7%. The global performance has been declining for three consecutive quarters.

The decline in revenue in the fourth fiscal quarter is mainly due to the weak performance of the North American market, which accounts for 70% of Starbucks' share, especially the US market. Although the average customer transaction value increased by 4%, the same-store transaction volume decreased by 10%, resulting in a 6% year-on-year decline in same-store sales.

The performance of the second-largest market, China, is also not outstanding. In the fourth fiscal quarter in China, Starbucks' average customer transaction value decreased by 8%, and the same-store transaction volume decreased by 6%, resulting in a 14% decline in same-store sales.

In view of the transition of the new CEO and the current business situation, Starbucks has suspended the release of the full-year performance guidance for fiscal year 2025. Therefore, when Starbucks officially discloses its performance today, perhaps the outside world is more looking forward to the new CEO's first earnings report than the not-so-bright data.

At the meeting, Starbucks Chairman and CEO Brian Nicol said that Starbucks will fundamentally change its strategy, including simplifying the menu, reducing discounts, slower but more orderly innovation, and reducing the number of new stores in the next fiscal year to release funds to support the transformation.

Starbucks' subtraction strategy is not unfamiliar. During his tenure as the CEO of Chipotle, Nicol had proposed similar strategies, such as not offering a breakfast menu, stopping inefficient promotions such as "Buy One Get One Free", and instead emphasizing the company's quality leadership through the marketing plan of "For Real".

Not long ago, according to foreign media reports, Starbucks is reducing promotions and discounts. This is a measure by Laine Nicol. Since he was appointed as the CEO in August, Starbucks has quietly reduced the crazy discounts that have been offered for a long time in the past year.

The change is behind the slightly embarrassing fact - the low-price strategies such as "Buy One Get One Free" and 50% off that Starbucks previously launched did not increase the transaction volume in the stores, and the financial report numbers have explained everything.

Nicol's key requirement for the middle managers of Starbucks in some core areas is "to increase the repurchase rate of users by improving the store experience and adjusting the products, rather than relying on low prices to increase the consumption frequency." According to Huxiu report, this adjustment to the price reduction strategy will not affect Starbucks' business in China.

It is observed that the promotion strategy of Starbucks in China has not changed much. Discounts on Dianping, Meituan, and Douyin are still continuing, and discounts such as 45.9 yuan for two large cups and 55.9 yuan for three large cups after 4 pm can still be seen on the mini-program official website. Although the intensity is not as strong as "39.9 yuan for two cups" and "49.9 yuan for three cups" and "Buy One Get One Free" in the first half of the year, in the Starbucks Delivers, there are more product options with 49.9 yuan for two large cups.

If the coffee of Starbucks, which used to cost more than 30 or 40 yuan per cup, made young people with limited budgets hesitate, then why is it difficult to win their hearts even with a price of less than 19 yuan per cup now?

Of course, a part of the well-known reason is the diversion of competitors. Although the price war of 9.9 yuan between Luckin Coffee and Cotti Coffee has eased, the price still has a more attractive appeal than Starbucks. A customer said that a cup of coffee at Luckin Coffee costs 17 - 19 yuan, and there are countless options. At Starbucks, there are only a few products with discounts, like a one-to-many confrontation.

Interestingly, the earnings reports of Luckin Coffee and Starbucks were released at the same time. Luckin Coffee's total net revenue in the third quarter of this year was 10.2 billion yuan, with a 41% year-on-year increase, and the net profit was 1.3 billion yuan, with a 32% year-on-year increase. Starbucks' net income in China in the fourth fiscal quarter was 780 million US dollars, with a 6% quarter-on-quarter increase.

In terms of the number of stores, Luckin Coffee opened 1,382 new stores in the third quarter, with a 7% quarter-on-quarter increase. As of the end of the third quarter, Luckin Coffee had 21,343 stores, including 13,936 self-operated stores and 7,407 affiliated stores. Starbucks added 290 new stores in the fourth quarter, and by the end of the quarter, the total number of Starbucks stores in China reached 7,596.

Starbucks is facing a decline in same-store sales, and Luckin Coffee has not been able to escape either. The comparable same-store revenue of Luckin Coffee's self-operated stores decreased by 13%. However, in terms of revenue and the number of stores, Starbucks in China has been left behind by Luckin Coffee.

The low-price strategy has not worked. The morning coffee scene has been snatched away by Luckin Coffee, and the afternoon milk tea consumption has been shared by brands like Bawang Chaji and Xi Cha. The response speed is also not as fast as its competitors. When Luckin Coffee's Light Jasmine tea exceeded 44 million cups in the first month, Starbucks slowly launched its own milk tea product.

Of course, Starbucks in China is also trying to attract young people and occasional consumers, such as increasing the frequency of new product launches and adding elements that young people like to new products. This can also be seen from the financial report. In the fourth fiscal quarter, Starbucks launched a total of 22 new drinks in China. However, among the new products launched by Starbucks in the last two or three months, such as Grapefruit Tieguanyin Tea Latte and Fire Crystal Persimmon Frappuccino, young people who tried them on Xiaohongshu couldn't help but complain that they are "too sweet".

In terms of marketing promotion, Starbucks has lowered its stance and joined the short dramas loved by young people. In September, it launched the short drama "I Open Starbucks in Ancient Times". Official data shows that the viewership exceeded 170 million times, and the interaction volume exceeded 1 million times.

People close to Starbucks told 36Kr that in the short drama, Starbucks also adheres to its own values, such as focusing on making a good cup of coffee, serving customers well, and emphasizing Starbucks partners, etc. In order to actively embrace the local market, the drama also adds a lot of Chinese style, local characteristic elements and culture. In terms of emotional appeal, the short drama chooses the sweet romance direction. In the drama, when the male lead confesses, he makes a Caramel Macchiato for the female lead, which has a meaning of being sweet to the heart.

In fact, since Starbucks entered the Chinese market 25 years ago, what has supported its rapid growth is neither the product nor the marketing, but the concept of the "Third Space" that has been dominant. This may explain to some extent why Nicol wants to redefine the positioning of Starbucks as a community café. Instead of being attacked from both sides in the fields that it is not good at, such as low prices and products, it is better to return to its most familiar position to build a defense.

It is worth mentioning that one day before the release of Luckin Coffee's quarterly report, foreign media quoted informed sources as saying that Luckin Coffee will enter the US market as early as next year and is currently preparing for supply chain and technical adjustments.

The informed sources also said that Luckin Coffee will target cities with a large number of Chinese students and tourists, hoping to use its experience in selling affordable coffee in China to weaken its US competitors by selling coffee priced at around 2 or 3 US dollars. In addition, Luckin Coffee has been playing advertisements during NBA games to build awareness before the planned launch.

In the first week of his tenure, Nicol said in the "Open Letter to All Customers, Partners and Stakeholders" that Starbucks promises to return to its original intention and focus on four key areas first: Empowering baristas to take care of customers, seizing every morning, redefining Starbucks' positioning as a community café, and telling Starbucks' story.

Returning to the original intention is of course a good thing, but more urgently, Starbucks will face the biggest enemy from China in its most familiar battlefield.