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In 2023, Starbucks opened more new stores in the county town

阿豆学长长ov
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On January 31, Starbucks released its first quarter financial report for the 2024 fiscal year. As of December 31, 2023, Starbucks China's operating revenue was 735 million US dollars (approximately RMB 5.278 billion), a year-on-year increase of 18%. Starbucks CFO Rachel Ruggeri stated at the meeting that this was mainly due to a 15% increase in new stores and a 10% increase in same store sales.
Starbucks is constantly sinking to open more stores in the county town.
In the first quarter, Starbucks added a net 169 new stores and entered 28 county-level markets, with a total of 6975 stores. In January, Starbucks has exceeded 7000 stores in the mainland Chinese market.
"As of this quarter, we have covered 857 out of nearly 3000 county-level administrative regions in China. We have huge market opportunities, including increasing penetration in existing cities and entering new county-level markets," said Belinda Wong, Chairman and CEO of Starbucks China, in response to analyst questions at the meeting.
In September 2022, Starbucks released its 2025 China strategic vision at its Global Investor Exchange Conference. It plans to open an additional 3000 stores in China within the next three years at an average rate of opening a new store every 9 hours, bringing the number of stores to 9000. This is the largest "growth plan" in Starbucks' 51 year history targeting a single regional market outside of North America. The core of this plan is sinking.
Starbucks has 857 county-level city stores, accounting for approximately 12% of its total stores. As a comparison, Luckin Coffee, which also obtains store growth space through sinking, currently has approximately 5498 stores in third tier and below cities, accounting for 32.12%, according to brand monitoring data from Jihai.
The different brand positioning determines the different penetration levels of these two coffee giants into the sinking market, but it may also indirectly indicate that Starbucks can still find growth space here. Wang Jingying also stated at the performance meeting that Starbucks has demonstrated better profitability in its new stores in county-level cities compared to new stores in high-end markets. She also revealed that Starbucks China plans to continue accelerating store sinking and achieve a 13% increase in store numbers in the 2024 fiscal year.
But in the current economic environment and competitive situation, people who go to Starbucks spend less money.
In the first quarter, Starbucks' same store sales (only counting self operated stores that have been open for 13 months or more) increased by 10%, with a 22% increase in same store transaction volume, while the average unit price per customer decreased by 9% year-on-year. The surge in same store transaction volume was partly due to last year's lower base.
Wang Jingying responded to analyst questions at the meeting and stated that the decrease in average unit price comes from two aspects. As consumers become more cautious, Starbucks has seen a decline in sales of its high priced products, although the proportion of such products is relatively small; In addition, Starbucks is conducting targeted promotions to provide personalized discounts, which will help optimize its sales and profits.
In fact, the decline in average customer price has been occurring since at least August 2023. In the fourth quarter of the 2023 fiscal year, Starbucks China saw a 5% increase in same store sales (only counting self operated stores that have been open for 13 months or more), with an 8% increase in same store transaction volume and a 3% year-on-year decrease in average unit price. The changes in consumer willingness in the Chinese market and the fierce competition in the coffee market undoubtedly have an impact on Starbucks.
"We have seen a large influx of competitors in the mass market, who are focused on fast store expansion and low price strategies. We are indeed conducting business in an increasingly competitive promotional environment," said Wang Jingying, but she also said that over time, this situation will gradually disappear.
Wang Jingying emphasized that Starbucks has no intention of participating in a price war and focuses on achieving high-quality, profitable, and sustainable growth, with the goal of becoming the preferred brand in China's high-end coffee market.
Starbucks has also made multiple attempts to address the challenges.
On the one hand, it is to accelerate the pace of launching new products in China, in order to increase the possibility of the next explosive product. Starbucks CEO Laxman Narasimhan stated at the performance meeting that Starbucks continues to focus on new product development, launching a total of 12 new coffee drinks in the first quarter.
For example, in October last year, Starbucks launched a more niche boutique "Nong/Series" coffee drink, which includes four flavors: Crested Crested, Red Velvet Crested, Cocoa Chino, and Nong Coconut Fury White. It also changed the cup shape for the first time, maintaining and continuously attracting its original target audience by enhancing the "boutique" feel of coffee products; On January 3rd of this year, Starbucks launched a new core espresso called "Golden Roast Concentrate", which was also its first large-scale launch of the second core espresso besides classic espresso since entering the mainland Chinese market in 1999.
At the Morgan Stanley Global Consumer and Retail Conference held in December 2023, Nasihan also mentioned that currently, 85% of Starbucks beverage sales are core products, and 15% are seasonal or new products. Starbucks will promote its core products in more ways, while also bringing new changes to its core products.
In addition, in terms of digitalization, Starbucks disclosed that its digital business (specialty delivery and fast delivery) continued to grow in the first quarter, accounting for 52%, reaching a historic high, with a growth of 4% compared to the previous quarter. The consumption frequency of Venus members has increased by nearly 10% compared to the previous quarter. The proportion of member sales increased to 73%.
Overall, Starbucks still wants to continue its efforts in localizing coffee products and customer experience innovation, investing in technology and digitization, and expanding into blank markets. Nasihan also stated at the performance meeting that it is expected to achieve the development goal of opening 9000 stores by 2025.
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