Starbucks to cut prices in China

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Starbucks will cut the prices of several iced and tea-based drinks in China, as the coffee chain grapples with heated competition in its second-biggest market.

The Seattle-based company said in a social media post on Monday it would reduce the prices of products, including tea lattes and frappucinos, by an average of Rmb5, taking the price of certain drinks to Rmb23 ($3.20).

Businesses in Chinese consumer sectors from cars to food and beverage have been under pressure to lower prices amid a weaker economic backdrop and intense competition.

Deflation extended into its fourth straight month in May, with consumer prices dropping 0.1 per cent year on year, according to official data on Monday.

Starbucks has a major presence in China. The market is by far its largest outside the US, with 7,685 stores as of the end of last year.

The company has continued to expand in mainland China, adding a record number of net new stores in the year to September 2024 and opening its own roasting plant in the city of Kunshan.

But its plans have come under pressure from the proliferation of cheaper domestic alternatives.

Shanghai’s Manner Coffee, for example, charges Rmb15 for a 355ml Americano, and Luckin Coffee charges Rmb14 for a 473ml Americano, compared with Rmb27 for a 355ml Americano at a Starbucks in Shanghai.

In its annual report for the year ending in September 2024, the company cited the risk of “a highly competitive retail environment and the entry of new competitors to the specialty coffee market in China”.

Starbucks declined to comment beyond its social media post.

Like coffee, China’s tea sector has seen significant competition, driving initial public offerings of several mainland companies.

Bubble tea chain Mixue listed in Hong Kong this year, raising $444mn, and is also expanding into coffee, for which it charges Rmb6.9 a cup.

Additional reporting by Wang Xueqiao in Shanghai