Starbucks lowers prices in China as rivals brew up discount war
China will lower the prices of some of its iced drinks by an average of 5 yuan (USD 0.70) across the country, the company announced on Monday, as competition intensifies and consumers become more cautious about spending.
In a post on its Weixin social media account, the U.S. coffee chain said it would offer more "accessible" prices on dozens of its drinks, including non-coffee drinks and the Frappuccino, from Tuesday.
While China is Starbucks' second-largest market after the U.S., the coffee market is highly competitive and consumers have become more cautious about spending because of the slowing economy and concerns about job security.
The new approach means some of Starbucks' drinks will be priced as low as 23 yuan, the post said.
Domestic rivals such as
Luckin Coffee
and Cotti have priced their drinks as low as 9.9 or even 8.8 yuan, while deep-pocketed internet companies JD.com and Alibaba Group have entered the food delivery market, adding to the competition. With offers and vouchers, Chinese coffee consumers can buy themselves a drink for as little as 2.9 yuan.
A person close to Starbucks, said the company was not reducing prices in response to intense price competition, but looking to attract more customers in the afternoon.
The individual requested anonymity as they were not in a role that allowed them to comment to the media.
"Starbucks likely has a longer-term strategy, which is to focus on the demand for non-coffee items in the afternoon among consumers," the source said.
Starbucks had said previously that it would not engage in a price war. However, it has also introduced smaller-sized drinks and issued coupons which have lowered prices for customers
The U.S. giant has also been looking to revive its business in China via selling stakes in the business.
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