SHANGHAI (Reuters) – As Starbucks faces stiff competition for its brew in China from fast-growing, low-cost rivals who have chipped into its market share, the coffee chain is increasingly being dragged into a price war it says it wants to avoid.
However, analysts, Reuters checks and Chinese consumers posting on social media point to an increase in discount coupons being offered by Starbucks through its own mini-programs, as well as via the coffee-maker's livestreams on Douyin, and third-party delivery platforms popular for ordering coffee.
In effect, Starbucks has made it relatively easy for Chinese consumers to buy its most commonly ordered coffees with 30% discounts or two-for-one coupons without dropping their listed prices, sliding down a slippery slope of increased discounting towards a potential price war.
The emergence of a price war in the coffee sector in China comes amid a persistent deflationary environment, exacerbated by weak consumer sentiment as the economy struggles to recover and wages stagnate.
Unfortunately for Starbucks, says Jason Yu, greater China managing director of market research firm Kantar Worldpanel, it doesn't really have a choice but to compete to some degree on price in a market where low cost battles have become “the new normal”.
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