On June 20th, Starbucks China announced an upgrade to the membership system of the Star Enjoyment Club. Starbucks has broken through boundaries for the first time and partnered with Hilton Group to jointly innovate member experiences. Starting today, members of both parties can join each other's membership system and enjoy special benefits through their respective apps and other channels.
A journalist from First Financial News found that since Starbucks first introduced the Star Club membership system in 2011, there have been several upgrades. In 2015, the "Virtual Star Card" feature was added. In 2020, the upgraded membership system has a richer selection of redeemable gifts and quick star accumulation activities.
Recently, in addition to Starbucks' membership system, what strategies will Starbucks, as a leading enterprise, have attracted much attention when its peers are engaged in price wars.
When many consumers post low-priced Starbucks on social media platforms, while enjoying discounts, they are also curious whether Starbucks can always be so cheap?
The reporter from First Financial News learned from Starbucks that Starbucks did not participate in the 9.9 price war. Many consumers who purchased Starbucks at low prices are actually extreme discounts achieved by consumers using various subsidies on the platform. These are very few customer cases, and they need to meet many conditions in order to have the opportunity to accumulate multiple discounts from platform subsidies. This is not brand behavior.
Starbucks China Chairman and CEO Wang Jingying said at the financial report press conference, "Starbucks China is launching personalized promotional activities to increase consumer purchasing frequency, which allows us to optimize sales and profits." Starbucks CFO Rachel Ruggeri also revealed that "Starbucks will innovate in discount work.". From this perspective, it is not surprising that Starbucks is involved in the era of nationwide promotions, including various June 18th, New Year's promotions, summer celebrations, and all brands and industries.
Wang Jingying also stated that Starbucks aims to pursue high-quality, profitable, and sustainable growth, consolidate its leadership in the high-end track, continue to focus on high-quality coffee and cultural connections, and continue to bring high-end coffee experiences to Chinese customers.
Zhu Danpeng, Vice President of Guangdong Food Safety Promotion Association, told First Financial reporters that Starbucks cannot participate in a price war with its brand tone. It will only offer some limited time discounts and extend prices at a certain point or in another way, because it is necessary to maintain brand tone. The current coffee market in China has been divided into six different consumer levels, and Starbucks does not need to overly cater to the entire population. As long as it caters to the mid to high end consumer group, it can basically maintain a stable business volume, revenue, and profit growth.
Although Starbucks has its own rhythm, it is not difficult to see that the competition it faces in the Chinese market is very fierce. In the first quarter of 2024, Starbucks China's same store sales increased by 10% year-on-year, but the unit price per customer decreased by 9% year-on-year.
Although Starbucks has not joined the price war to "roll" prices, it has "rolled" in other aspects and frequently launched new products, which is a major change. Starbucks China launched a total of 27 new products in the second quarter of the 2024 fiscal year, with the number of new products being twice that of the previous quarter and three times that of the same period last year.
In addition, in order to continue to deepen its presence in the Chinese market, Starbucks has also made efforts in supply chain and digitalization.
On September 19, 2023, Starbucks China Coffee Innovation Industrial Park was completed and put into operation in Kunshan, Jiangsu. This means that China has taken the lead in achieving large-scale integration of the vertical industry chain from raw beans to coffee in Starbucks' global markets. During the construction period of the industrial park, two additional rounds of investment were added, with a total investment of 1.5 billion yuan (approximately 220 million US dollars), which is Starbucks' largest investment in building a coffee production and logistics base in China. In addition, the Shenzhen Innovation Technology Center was also completed in 2023, focusing on operations, partners, customer experience, and other aspects, empowering first tier stores with digitization.