Giants also bow: Starbucks midlife crisis market share erosion

Giants also bow: Starbucks midlife crisis market share erosion

Original title: Starbucks's midlife crisis

Times weekly reporter: Wang Xinhao

Starbucks, the former coffee hegemon, is facing its "midlife crisis" in the mid-1950s, when new retailers are flooding the market.

In an attempt to reverse stalled sales and reignite investor interest, CEO Kevin Johnson said in an e-mail to the company that Starbucks would restructure the company and cut staff from the top.

Starbucks's defense war has started.

"We must accelerate customer-related, motivational, and meaningful business innovation." Kevin Johnson said that in order to achieve this goal, some major changes will be made to the company.

Coffee shop selling "space"

In 1971, a cafe opened in the historic park market in Seattle. The small cafe, named after the chief mate of Captain Ahab in Moby Dick, was a local coffee bean retailer in Seattle more than a decade before its founding.

The time to change the fate of this small cafe took place in 1982. This year, Howard? Schultz joined Starbucks as the retail business and marketing director of the coffee shop. A business trip to Milan a year later gave Schultz a fresh inspiration. As he walked into a local coffee bar and drank his first cup of Italian fragrant coffee, he suddenly had the idea of starting Starbucks as we see it today. "The original relaxed atmosphere, friendship space, mood change, is really attracted to the essence of the cafe customers come again. What we want is not a cup of coffee, but the time to crave coffee. That's what Starbucks wants to do. I was really excited at that time, "he recalled later." There was no such thing in America, and I had a hunch that I would make a big difference.

American sociologist Ray Oldenburg called the family living space the first space and the workplace the second space, while the city's bars, cafes, museums, libraries, parks and other public spaces for the third space. Odenberg regards the freedom to release oneself in a relaxed and convenient environment as the main feature of the third space.

This is Schultz's choice of development for Starbucks.

In Schultz's autobiography, Go All the Way, he talks about the direction Starbucks is heading: if home is the first space or the "first space" that people come into contact with, and work is the "second space" that people come into contact with, then public spaces, like cafes (like Starbucks) are what I usually mean. "Third space". A place between social and private spaces, between family and work, where people can connect and reflect on themselves. From the very beginning, Starbucks has embarked on this valuable opportunity.

Starbucks began a big acceleration in 1992 with the launch of its third space strategy.

The 1990s were a period of rapid growth for Starbucks in the U.S. market. In 1995 alone, each new Starbucks store contributed an average of $700,000 in revenue in its first year of operation, an average 60% increase over 1990.

Interestingly, the average rate of Starbucks opening stores in the United States from 1993 to 1997 was roughly the same as that in China from 2010 to 2014, and the total number of stores in the United States in 1997 was roughly the same as that in China in 2014. In China and the United States, Starbucks has experienced a similar period of rapid growth.

Market share was eroded.

After climbing the peak, no matter how it goes, it seems to be going downhill. Since 2017, the revenue of the coffee giant has been shrinking. Industry experts generally believe that this round of Starbucks major changes behind the company's declining revenue is an indisputable fact.

In the past few quarters, Starbucks has been struggling with sluggish sales, and the Chinese market has fallen sharply, with its first decline in nine years.

Not long ago, the third-quarter earnings report from Starbucks made investors more pessimistic about the company's future expansion. Overall, the coffee chain's global same-store sales grew by 1% in the first three quarters of this year, far below previous growth rates.

In terms of market performance, same-store sales in the Americas and the United States grew by 1%, while same-store sales in China and Asia-Pacific fell by 1%, and operating margins fell from 26.6% to 19%, with same-store sales in China falling by 2%.

Shen Meng, director of Xiangsong Capital, said that Starbucks is facing the same bottleneck as Coca-Cola: on the one hand, its core business is growing slowly as consumer demand changes; on the other hand, the pattern of the coffee market has changed dramatically, and new entrants have disrupted the market. Heng, resulting in the rise of Starbucks marketing costs, promotion and passenger diversion.

This phrase applies to Starbucks as well. In fact, Starbucks's market share is suffering from unprecedented erosion.

In the high-end market, high-quality coffee represented by blue bottle coffee, intellectual coffee and Philz Coffee is snatching up high-end customers of Starbucks, while in the low-end market, its users are gradually "swallowed" by the McDonald's as the representative of the giant's McCafe.

Giants also bow.

Since this year, the "high cold" Starbucks has become increasingly "reserved".

On August 28, Nestle and Starbucks completed a $7.15 billion deal to permanently license Nestle to sell Starbucks retail and catering products outside Starbucks coffee shops worldwide. In addition, about 500 star Barker employees will work in Nestle.

The agreement covers Starbucks packaged coffee and tea brands, including Starbucks, Seattle's Best Coffee, Tea Vaner, Starbucks VIA, Torrefazione Italia and Starbucks-branded K-Cup capsules. In the Chinese market, Starbucks is also starting to do business that has never been done before: takeaway.

On August 2, Starbucks and Alibaba announced a strategic partnership, Starbucks will rely on the hungry Mo distribution system on-line delivery services, and will create the first brand of kitchen "out-of-the-box" Starbucks takeout officially surfaced.

Starbucks is scheduled to launch a pilot outbound service in 300 stores in Beijing and Shanghai from mid-September this year, and plans to reach more than 2,000 stores in more than 30 major cities by the end of the year.

In the coffee industry's view, working with Ali will open a new global retail business for Starbucks. In the past, the off-line sales model adopted by Starbucks worldwide is difficult to realize online digitization of store consumption behavior, and can not be more fully excavated.

The new retail pace of coffee will allow traditional offline cafes like Starbucks to get more data and optimize operations. According to the user preferences for each user labeled consumption, based on each person, based on the time at that time, based on the user's budget, to achieve the user's personalized consumption.

But in the U.S., some investors worry that the new retail business will hit Starbucks'third space. These investors believe that Starbucks is selling scenes and time, and users go to Starbucks to value its store environment, service and atmosphere.

Has Starbucks's takeaway through the Internet already weakened its brand and other value-added? Can Starbucks use the "third space" growth strategy to lead enterprises out of the midlife crisis? This is perhaps the most difficult task for Johnson reform.

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