Starbucks's profit margin in China has declined for the first time in 9 years.


Starbucks's profit margin in China has declined for the first time in 9 years.

Original title: Starbucks's profit margin in China declined for the first time in 9 years, ready to use this to please the Chinese people.

This year is the twentieth year of Starbucks (NASDAQ:SBUX) entering China. Like many foreign brands, the company is in the middle of a "middle age crisis" in China.

Starbucks's 2018 third quarterly report (as of July 1, 2018) showed that Starbucks's operating profit rate dropped 7.6 percentage points to 19%, although revenue and operating income rose by 46% and 5% over the same period of high expectations in the China / Asia Pacific market. In the earnings report, Starbucks attributed the cause to the impact of the company's equity changes in East China.

The daily economic news (nbdnews) reporter learned that the decline in operating profit margins in China / Asia Pacific region was the first decline in Starbucks's data in the past 9 years. In addition to the decline in operating profit margins, Starbucks China's comparable store sales sales (notes: at least one year as the premise, the same sales store in the same period of sales at the same time in the same period, usually in the same month, quarterly sales sales) decreased by 2% from the same period last year. The rise of 7% is in sharp contrast.

Accelerated expansion of operating profit margins

Today, Starbucks has opened more than 3,300 stores in more than 140 cities in China, and the Chinese market has become the fastest growing and largest overseas market for the company.

Starbucks'Q3 earnings also showed a 46% jump to $1.23 billion in China/Asia Pacific revenue during the reporting period. Starbucks also said it expects to surpass the US in 10 years and become the largest market in the world.

It needs to be pointed out that in this latest quarterly report, Starbucks's operating profit margin in China / Asia Pacific region, another important operating indicator, has dropped by 7.6 percentage points to 19%.

The daily economic news (nbdnews) reporter noted that the Starbucks China / Asia Pacific region's decline in performance was Starbucks's accelerated opening in China. In May, Starbucks held an investor conference in China, and Starbucks said that by the end of the 2022 fiscal year, the number of stores in the mainland will reach 6000, and the number of new cities will reach 230 cities, and the number of new stores will be raised to 600 each year.

Starbucks officials describe the pace of expansion in China as follows: every 15 hours, a Starbucks store opens in China.

In recent years, Starbucks China's main competitive pressure or Internet coffee, in November 2017, LuckinCoffee (Rui lucky coffee) with a high profile of 1 billion funds, the target is not a taboo of Starbucks. In May, Mr. Rui also issued an open letter, accusing Starbucks China of exclusiveness in contracts signed with many properties, suspected of being a monopoly and filing a lawsuit to the court.

According to a special report released by Goldman Sachs, it has become the No. more than 2 brand in China's coffee chain brand, second only to Starbucks and the lowest in the top 5 of the top 5 coffee brands, although it has entered the market relatively late compared with competitors in the industry. Compared with Starbucks, the consumer group of Suisse coffee is younger, and the percentage of consumers under 24 is up to 48%; and the Ruiji coffee line is concentrated in the business district.

Ready to launch a coffee takeout service?

In the face of fierce competition in the Chinese market, Starbucks has come up with a strategy - according to CNBC, Bloomberg and other media sources, in order to reverse the decline in sales in the Chinese market, Starbucks is ready to cooperate with the e-commerce giant Alibaba to launch a coffee service.

Bloomberg quoted a source of information saying that the cooperation between Starbucks and Ali was not limited to the scope of coffee takeout, but the personage did not specify. The person also said that after working with Ali, Starbucks and Tencent in mobile payment and social gifts cooperation will not be affected.

In accordance with or will be announced later this week, the Alibaba's takeout subsidiary will start offering a takeout and distribution service to Starbucks this fall, the people said. At present, Starbucks does not comment on how to cooperate with the hungry, but Starbucks said last week that it was planning to introduce foreign distribution service partners in the Chinese market.

"The introduction of a coffee delivery service is an important first step in Starbucks," Sharon Zackfia (SharonZackfia), an analyst at William Blair, an investment company, wrote in a research report. "Although the use of the third party express service may have an impact on its profit margin, it is better than sales decline."

Faced with intense competition from Internet coffees such as Ruixing Coffee, Starbucks acknowledged that its business in China was "not doing well". In order to change this situation, the company decided to launch coffee service in Beijing and Shanghai this fall.

Reporter Cai Ding

Editor in responsibility: Zhang Shen


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