Clearly the focus of Starbucks revenue growth is on beverages, not foods.
Editor’s note: This article is from WeChat public account “小食代” (ID: foodinc), author He Danlin. The original title “Starbucks CFO predicts that Rui Xing will be forced to give up “radical discounts”, and that the price of Chinese takeaway customers is higher than the store”
Under the unexpected “strike” of the Nasdaq-listed Ruixing Coffee, the top executives of Starbucks, the world’s largest coffee chain, had to comment on this opponent on Wall Street.
The snacks noticed that just last night, Starbucks Chief Financial Officer Patrick Grismer (pictured below) made a sharply worded comment on Ruixun Coffee at the 26th Global Retail Conference of Goldman Sachs. In addition, he also recently talked about Starbucks’ expansion strategy in China, the progress of digital services such as takeaway and “Crystal”, and cooperation with Nestlé’s coffee alliance.
Tonight, the snack food will bring you to see the official to hear his statement.
Opening a store expansion strategy
At the meeting, Grismer first stated that he was “very satisfied” with the overall performance of Starbucks China business. “Last year, our same-store sales have declined, which is consistent with the overall market we have observed, that is, the Chinese economy continues to grow at a relatively strong rate, but not as strong as two or three years ago, of course this is also in the retail industry. It is reflected in it,” he said.
“What I want to say is that we value Starbucks’ development in China compared to same-store sales,” Grismer said.
He said that over the years, Starbucks has a good cash return on its new store investment in China. “Given the size of this market and our strong high-end positioning, we believe that we are fully capable of taking advantage of these trends and continue to expand at a very aggressive pace, but this will certainly sacrifice the growth of same-store sales to some extent. “He says.
Newly opened Starbucks selected Tianjin flagship store
The snacks were noticed, and Wall Street analysts later asked: “Does this mean that Starbucks is facing a certain competitive effect in the process of opening new stores in China? Compared with second- and third-tier cities, this is the first-tier city. Will the problem be more obvious?”
Grismer replied that first-tier cities do face even greater challenges because Starbucks has a higher penetration rate in first-tier cities, so when Starbucks opens a new store, it will be more likely to affect existing stores. “But we are aware of this situation and choose to do this because we are looking at long-term opportunities and we are going to develop in China for a long time,” he said.
He pointed out that in recent years, Starbucks China’s total transaction frequency has continued to grow at double-digit rates, and the number of stores is also at double-digits (13%-19%). Growing up.
As Starbucks is busy opening stores, the competition for Chinese coffee is getting more intense. In addition to Ruixing and “foreign fast food”, this week even news of Sinopec gas station coffee came out.
“I believe that Starbucks in China has largely demonstrated the appeal of high-end coffee chain stores, which has attracted many competitors, not just coffee, but also in tea,” Grismer said at the meeting. .
The snack food was introduced a few days ago. On the tea, the competitor Ruisheng Coffee, which did not follow the routine, had a new move. The company, which was founded less than two years ago on IPOs, ran on the road of rapid development. Ruixing announced on Tuesday that its sub-brand “Xiaolu Tea” operated independently and hired popular star Xiao Zhan as the spokesperson of Xiaolu Tea brand. At the same time, it launched the “New Retail Operation Partner Model” to recruit operating partners nationwide.
According to Liu Jian, chief operating officer of Ruixing Coffee, Ruixing will open Xiaolu tea shop nationwide. In the consumption scene, Xiaolu tea shop will focus on leisure scenes, and Ruixing coffee shop will focus on office scenes. In the future, Xiaolu Tea is expected to have more than 30 products, and will also launch an independent APP and small program ordering system, and open an account with Ruixun Coffee.
Outgoing and “Crystal”
In order to cater to consumers’ demand for convenience, Starbucks has significantly accelerated its layout in the digital field in the past year. It has launched the “Crystal Express” service for take-out and in-store mobile payment.
When it comes to the take-away business, Grismer said at the meeting that Chinese consumers are more digital than the US market, so the take-away business is growing much faster. Since Starbucks is in the first year of its operations in the US and China, it is still in its early stages and is “quick learning and adjustment mode”.
“We are pleased to have a strategic partnership with Alibaba. They have supported the growth of our digital business. Currently, our digital business mainly includes take-out and the recently launched ‘Crystal Express’, we see the latter It is also being quickly accepted by consumers,” he said.
Starbucks opens the world’s first “Crystal Express” concept store in July this year
Talking about “Crystal Express,” Grismer said that because Starbucks’ Chinese store sales peak in the afternoon, this convenient service helps consumers to form the daily habit of drinking coffee in the morning and promote Starbucks morning sales. increase.
Interestingly, according to him, the average customer price of Starbucks takeaway is higher than the store.
“We see in all markets that offer takeaway services that the price of takeaway customers will be higher than the store.” One of the reasons is that Grismer has a higher proportion of orders for additional food in takeaways – exceptCoffee, Starbucks and food can be delivered.
“I think this makes sense. If you want to order a drink for sale, you will probably want to order food. Although for Starbucks, food is an add-on service,” he said.
Although food helps to raise the price of takeaway customers, the snacks have noticed that in the subsequent Q&A session, he stressed that the focus of Starbucks revenue growth is on beverages, not food. “When we talk about the key drivers of future growth, food is not prominent in this strategy,” he said.
He explained that this is not to say that the food business is not important to Starbucks – food sales account for about 21%, but for companies like Starbucks, maintaining long-term high growth requires caution and Focus, focus on its differentiated competitive advantage, and use energy and resources in the cutting edge, which is the field of drinks.
Grismer also pointed out that another factor that drives the unit price of take-out customers is “group purchase”. “Especially from the office orders, you will see an average customer price is higher. This is also plausible, because if someone in the office called Starbucks takeaway, other colleagues may also join the same order. “He says.
Rui Xing and Nestle
The snack foods have noticed that this year’s total number of stores in the country has more than 4,500 Ruixing coffee, which has become one of the focuses of analysts.
“Speaking of Ruixing Coffee, its growth and development has been interesting in the past few years.I have to say that their store growth is impressive. ” Grismer said during the Q&A session.
In August this year, Ruixing announced its first financial report since its listing. “The result we saw was that they had about 25% fewer stores in China than Starbucks, and the stores were 75% smaller than Starbucks on average, or an average of only a quarter of Starbucks, but they grew very fast.”Say.
He said that it is very important that Ruishen Coffee is aimed at different consumer segments and targeting different coffee segments.
“Their occasion is not the third space, they don’t design coffee shops like us, which is reflected in their very small store area. They are targeting different consumer occasions and have different pricing, this It also means different qualities,” he said.
“This is not to say that we should ignore the existence they have built, but remember that they are doing this with extreme marketing and very aggressive discounts,” Grismer said.
He believes that it is still to be seen how Ruisheng Coffee can maintain this growth, “because they will be forced to give up their extreme marketing and aggressive discounts over time.”
He said that Starbucks will continue to pay attention to Ruixing coffee. “I just mentioned that one of the reasons for the slowdown in Starbucks’ same-store sales growth in China is overall competition (intensification). I am not specifically referring to Ruixing, but they have become part of the industry competition,” he said.
At the beginning of this month, the first wave of new products jointly launched by Nestlé and Starbucks has been officially listed on the Chinese mainland market
After finishing the “opponent”, Grismer also mentioned “allies.”
“One thing we observed was that it was feasible to build brand awareness, create brand preferences, and then launch packaging consumer goods through coffee stores.” He said that Nestlé has a global consumer packaged consumer goods business. “Of course, better than me.They are pushing themselves much faster.
He said that as of now, Starbucks and Nestlé’s global coffee alliance have already landed in 16 markets, hopefully the next step will be very rapid penetration into the remaining 60 markets that Starbucks has in retail business .