Starbucks lowers prices in China as rivals brew up discount war
Starbucks
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.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Indian Express
35 minutes ago
- Indian Express
Before China's rare earth curbs, India's permanent magnet imports nearly doubled in FY25
India's imports of permanent magnets—many containing rare earth elements (REEs)—nearly doubled to 53,700 tonnes in 2024-25 (FY25) from around 28,700 tonnes the year before, according to official trade data. The surge in imports, with 93 per cent coming from China, preceded Beijing's April 4 export restrictions on rare earth magnets, which have since disrupted production lines globally. In India, with just 2-3 weeks of REE magnet supply remaining, industry executives are expected to travel to China in a bid to ease the shortage, sources told The Indian Express. Consumption of permanent magnets has grown significantly in India over the last five financial years—from just 12,400 tonnes in FY21 to 28,700 tonnes in FY24, before imports surged 88 per cent to 53,700 tonnes in FY25. Despite the large jump in quantity imported in FY25, the value of imports grew by only 5 per cent to Rs 1,744 crore, which is suggestive of a decline in prices. China is the dominant supplier of permanent magnets in India, accounting for upwards of 90 per cent share. Imports from China increased by 95 per cent year-on-year to 50,000 tonnes in FY25. Permanent magnets, especially those made with REEs, are widely used in electric vehicle (EV) motors, wind turbines, aerospace, and defence. In contrast to FY25, imports in the ongoing financial year are expected to be tempered, after China imposed export restrictions on rare earth magnets and related materials from April 4, as a direct response to US imposing tariffs. In India, a supply crunch is in the making, especially for neodymium-iron-boron (NdFeB) magnets used in EV motors. Over the past month or so, Indian carmakers are learnt to have used up inventories and there is likely to be a shortage going forward. 'There is only 2-3 weeks of supply left. At present, complying with China's rules seems to be the only option. There may be a delegation of industry representatives going to China to resolve the issue,' sources said. Earlier, a senior executive from the Indian car industry told The Indian Express that importers are now required to give their Chinese suppliers an undertaking that the rare earth magnets procured from that country would only be used in vehicles and not for defence or military applications. Currently, IREL (India) Ltd, a PSU under the Department of Atomic Energy, refines rare earth oxides from heavy metal ores, containing REEs like cerium, lanthanum, neodymium, and praseodymium. However, production is limited. Moreover, the processing of refining oxides into alloys—and then into magnets—is highly technical and virtually non-existent in India. Sources said an oxide-to-magnet plant of a subsidiary under the Midwest Group, a top natural stones player in India, is expected to get operationalised in Hyderabad in the next six months. Initially with just 500 tonnes per annum (TPA), the plant's capacity is expected to increase to 5,000 TPA by 2030. Figuring out the supply chain for rare earth ores is a key challenge, with players looking at importing ores from Sri Lanka, Mongolia, and Myanmar, sources said. Another challenge for domestic players would be to remain viable as China significantly cuts prices of rare earth magnets. For instance, while the quantity of permanent magnet imports from China increased by 95 percent y-o-y in FY25, the total value of imports increased by only 12 per cent—from Rs 1,274 crore to Rs 1,425 crore. In other words, China massively cut prices of magnets it exported to India in FY25. According to the US Geological Survey's January 2025 data, India held the world's third-largest rare earth reserves in 2024—estimated at 6.9 million tonnes— behind China (44 million tonnes) and Brazil (21 million tonnes). However, on the production front, India ranked seventh at 2,900 tonnes, well behind China (255,000 tonnes), Myanmar (43,000), the US (41,600), Australia, Nigeria, and Thailand. In the January 2024 report, India ranked fifth in reserves. The latest revision reflects reduction in other countries' estimates—Vietnam's reserves were cut from 22 million tonnes to 3.5 million, and Russia's from 10 million to 3.8 million. Over the past year, the Ministry of Mines has auctioned three rare earth blocks—one each in Karnataka, Uttar Pradesh, and Chhattisgarh. But with further exploration still required, commercial production remains a few years away. Aggam Walia is a Correspondent at The Indian Express, reporting on power, renewables, and mining. His work unpacks intricate ties between corporations, government, and policy, often relying on documents sourced via the RTI Act. Off the beat, he enjoys running through Delhi's parks and forests, walking to places, and cooking pasta. ... Read More
Time of India
38 minutes ago
- Time of India
India-EFTA trade pact likely to be implemented from September: Piyush Goyal
India and EFTA's trade agreement may start in September. Piyush Goyal mentioned this after the agreement was signed on March 10, 2024. India will receive USD 100 billion investment in 15 years. Approvals are in progress. Goyal is in Switzerland to boost trade. Swiss firms are interested in pharma and cybersecurity sectors. There is excitement for India. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The free trade agreement (FTA) between India and the four-nation European bloc EFTA is likely to come into force from September, Commerce and Industry Minister Piyush Goyal said on two sides signed the Trade and Economic Partnership Agreement (TEPA) on March 10, 2024. Under the pact, India has received an investment commitment of USD 100 billion in 15 years from the grouping while allowing several products such as Swiss watches, chocolates, and cut and polished diamonds at lower or zero European Free Trade Association (EFTA) members are Iceland, Liechtenstein, Norway, and Switzerland."It will enter into force by September," Goyal told said the agreement has received approval from the Parliaments of all four countries. In Switzerland, there is an objection period open until July 10. July and August are holiday months is here for an official visit to meet leaders and businesses to promote trade and investments between India and said he held bilateral meetings with over a dozen companies here and most of them are keen to invest in Swiss firms have shown interest in sectors such as pharma, cybersecurity, and machinery manufacturing, he said."Lot of excitement here for India," he said.
Time of India
an hour ago
- Time of India
BYD unleashes an EV industry reckoning that alarms Beijing
HighlightsThe ongoing price war in China's electric vehicle industry, led by market leader BYD Company Limited, is causing significant declines in share prices and prompting governmental intervention to curb aggressive discounting and prevent further market instability. Despite attempts by Chinese authorities to manage the situation, analysts predict that overcapacity and weak demand will force many automakers, especially smaller ones, to consolidate or exit the market, as evidenced by the exit of 16 new energy vehicle brands in 2024. Concerns have emerged regarding the long-term sustainability of Chinese automakers, as relentless discounting erodes profit margins and brand value, while also risking the quality and safety of vehicles produced amid financial pressures. The price war engulfing China's electric vehicle industry has already sent share prices tumbling and prompted an unusual level of intervention from Beijing. The shakeout may just be getting started. For all the Chinese government's efforts to prevent price cuts by market leader BYD Co. from turning into a vicious spiral, analysts say a combination of weaker demand and extreme overcapacity will slice into profits at the strongest brands and force feebler competitors to fold. Even after the number of EV makers started shrinking for the first time last year, the industry is still using less than half its production capacity. Chinese authorities are trying to minimize the fallout, chiding the sector for 'rat race competition' and summoning heads of major brands to Beijing last week. Yet previous attempts to intervene have had little success. For the short term at least, investors are betting few automakers will escape unscathed: BYD, arguably the biggest winner from industry consolidation, has lost $21.5 billion in market value since its shares peaked in late May. 'What you're seeing in China is disturbing, because there's a lack of demand and extreme price cutting,' said John Murphy, a senior automotive analyst at Bank of America Corp. Eventually there will be 'massive consolidation' to soak up the excess capacity, Murphy said. For automakers, relentless discounting erodes profit margins, undermines brand value and forces even well-capitalized companies into unsustainable financial positions. Low-priced and low-quality products can seriously damage the international reputation of 'Made-in-China' cars, noted the People's Daily, an outlet controlled by the Communist Party. And that knock would come just as models from BYD to Geely, Zeekr and Xpeng start to collect accolades on the world stage. For consumers, price drops may seem beneficial but they mask deeper risks. Unpredictable pricing discourages long-term trust — already people are complaining on China's social media, wondering why they should buy a car now when it may be cheaper next week — while there's a chance automakers, as they cut costs to stay afloat, may reduce investment in quality, safety and after-sales service. Auto CEOs were told last week they must 'self-regulate' and shouldn't sell cars below cost or offer unreasonable price cuts, according to people familiar with the matter. The issue of zero-mileage cars also came up — where vehicles with no distance on their odometers are sold by dealers into the second-hand market, seen widely as a way for automakers to artificially inflate sales and clear inventory. Chinese automakers have been discounting a lot more aggressively than their foreign counterparts. BofA's Murphy said US automakers should just get out. 'Tesla probably needs to be there to compete with those companies and understand what's going on, but there's a lot of risk there for them.' Others leave no room for doubt that BYD, China's No. 1 selling car brand, is leading the way on price cuts. 'It's obvious to everyone that the biggest player is doing this,' Jochen Siebert , managing director at auto consultancy JSC Automotive, said. 'They want a monopoly where everybody else gives up.' BYD's aggressive tactics are raising concerns over the potential dumping of cars, dealership management issues and 'squeezing out suppliers,' he said. The pricing turmoil is also unfolding against a backdrop of significant overcapacity. The average production utilization rate in China's automotive industry was mere 49.5% in 2024, data compiled by Shanghai-based Gasgoo Automotive Research Institute show. An April report by AlixPartners meanwhile highlights the intense competition that's starting to emerge among new energy vehicle makers, or companies that produce pure battery cars and plug-in hybrids. In 2024, the market saw its first ever consolidation among NEV-dedicated brands, with 16 exiting and 13 launching. 'The Chinese automotive market, despite its substantial scale, is growing at a slower speed. Automakers have to put top priority now on grabbing more market share,' said Ron Zheng, a partner at global consultancy Roland Berger GmbH. Jiyue Auto shows how quickly things can change. A little over a year after launching its first car, the automaker jointly backed by big names Zhejiang Geely Holding Group Co. and technology giant Baidu Inc., began to scale down production and seek fresh funds. It's a dilemma for all carmakers, but especially smaller ones. 'If you don't follow suit once a leading company makes a price move, you might lose the chance to stay at the table,' AlixPartners consultant Zhang Yichao said. He added that China's low capacity utilization rate, which is 'fundamentally fueling' the competition, is now even under more pressure from export uncertainties. While the push to find an outlet for excess production is thrusting more Chinese brands to export, international markets can only offer some relief. 'The US market is completely closed and Japan and Korea may close very soon if they see an invasion of Chinese carmakers,' Siebert said. 'Russia, which was the biggest export market last year, is now becoming very difficult. I also don't see Southeast Asia as an opportunity anymore.' The pressure of cost cutting has also led analysts to express concern over supply chain finance risks. A price cut demand by BYD to one of its suppliers late last year attracted scrutiny around how the car giant may be using supply chain financing to mask its ballooning debt. A report by accounting consultancy GMT Research put BYD's true net debt at closer to 323 billion yuan ($45 billion), compared with the 27.7 billion yuan officially on its books as of the end of June 2024. The pain is also bleeding into China's dealdership network. Dealership groups in two provinces have gone out of business since April, both of them ones that were selling BYD cars. Beijing's meeting with automakers last week wasn't the first attempt at a ceasefire. Two years ago, in mid 2023, 16 major automakers, including Tesla Inc., BYD and Geely signed a pact, witnessed by the China Association of Automobile Manufacturers, to avoid 'abnormal pricing.' Within days though, CAAM deleted one of the four commitments, saying that a reference to pricing in the pledge was inappropriate and in breach of a principle enshrined in the nation's antitrust laws. The discounting continued unabated.
