Bubble tea giant embodies Starbucks' China dilemma
Both Mixue and Starbucks opened their first stores in China in 1999. For the latter the challenge was to introduce coffee culture to a nation obsessed with tea. This turned out to be a smooth blend. Chinese consumers have become more picky and cost-conscious of late, though, and the Seattle-based heavyweight's market share has dropped to 14% from 34% in 2019, per market data provider Euromonitor.
Starbucks is trying to fight back. It announced its first-ever price cut in China last month, although its offerings are still far more expensive than those from Mixue and other rivals like Luckin Coffee.
But Starbucks cannot compete on pricing alone. Its problems run deeper than that. Amid all the talks about China's weak consumer demand, some of the best-performing stocks in the past year have been the so-called new consumption, opens new tab plays, which include trendy toy maker Pop Mart International (9992.HK), opens new tab and handcraft jewellery retailer Laopu Gold (6181.HK), opens new tab. These are brands that resonate deeply with the shifting spending preferences of young Chinese to focus on intangibles such as convenience, experience or personalization.
Mixue's robust supply chain, for instance, allows it to reduce costs and introduce new beverages – or even new interior designs – to its more than 45,000 outlets within weeks. The same process may take much longer for Starbucks' 7,800 stores in China. And a similar strategy caused problems at its U.S. stores in the past. Boss Brian Niccol even told shareholders in March that Starbucks can learn from "several lessons" in its China supply chain and improve its North American business.
Shareholders have rewarded Mixue's strategy: its market value has soared almost 80% to some $25 billion since its Hong Kong listing in March.
Starbucks China, meanwhile, may be worth several billion dollars, Bloomberg reported in May, citing sources. Its same-store sales have at least levelled off recently, halting the earlier slump. And Niccol has emphasised the need to find ways to grow, opens new tab. That would seem to require having a local partner - and buyer - with a Mixue-style understanding of how to take advantage of China's new consumer logic.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Independent
an hour ago
- The Independent
Modi government called ‘out of touch' for claiming India is one of world's most equal nations
India 's opposition party has accused the Narendra Modi government of "intellectual dishonesty" after it claimed the country was among the world's most equal. The federal Ministry of Information and Broadcasting on 5 July claimed India ranked "fourth globally in income equality", citing a World Bank report. "This is a remarkable achievement for a country of its size and diversity," the release said. The World Bank, in its 'Poverty & Equity Brief' report in April, found that over the past decade India had indeed significantly reduced its poverty rate. "Extreme poverty [living on less than $2.15 (£1.5 )per day] fell from 16.2 per cent in 2011-12 to 2.3 per cent in 2022-23, lifting 171 million people above this line," the report stated. The World Bank said India's consumption-based Gini index improved from 28.8 in 2011-12 to 25.5 in 2022-23, while warning that inequality may be underestimated due to data limitations. The Gini Index, which ranges from value 0 through 100, is used to understand how equally income, wealth, or consumption is distributed across households or individuals. The lower the Gini Index, the more equal the country is perceived to be. The World Bank report added that in contrast, the World Inequality Database shows income inequality rising from a Gini of 52 in 2004 to 62 in 2023. "Wage disparity [in India] remains high, with the median earnings of the top 10 per cent being 13 times higher than the bottom 10 per cent in 2023-24," it added. The Modi government in its press note claimed that India's Gini index made it the fourth most equal country in the world, after the Slovak Republic, Slovenia and Belarus. The World Bank has made no such claims about India's ranking. "Three months after its release, the Modi Government's drumbeaters and cheerleaders have begun spinning the World Bank's data to make the staggeringly out-of-touch claim that India is among the world's most equal societies," the main opposition party, the Indian National Congress, said on X. Congress general secretary Jairam Ramesh dismissed the Hindu-nationalist Bharatiya Janata Party (BJP) government's assertion, arguing that no country with a poverty rate of 28.1 per cent could make "a justifiable claim to being one of the most equal societies in the world". He noted that the government's use of an updated purchasing power parity (PPP) conversion factor from 2021, rather than 2017, would inflate poverty reduction figures. 'More updated data... would result in a higher rate of extreme poverty,' the statement read. Indian news website The Wire noted if the World Bank's income inequality figures are accounted for rather than consumption, India has a Gini index of 61 in 2019 and 2023. That would rank India 176th out of 216 countries and territories, compared to an equivalent rank of 115th in 2009. The Congress party questioned the Modi government's poverty benchmarks, saying that according to the World Bank's lower-middle-income poverty line of $3.65/day (£2.6), India's poverty rate stood at 28.2 per cent in 2022. Mr Ramesh said the figure contrasts sharply with the government's assertion, based on a $3/day (£2.2) benchmark, that only 5.3 per cent of the population was living in poverty in 2022-23.
Daily Mail
2 hours ago
- Daily Mail
Trump's tariffs deliver fatal blow to two of Americans' favorite stores
US shoppers once flocked to Shein and Temu. Now, tariffs mean they are no longer in fashion. The Chinese online retail brands — which had seen seemingly unstoppable growth in recent years — have seen sales plummet over the past two months. In May, Shein's sales dropped by 10 percent. Temu's fell nearly 20 percent. Both have struggled to recover in the weeks since. Retail experts point to the April decision by President Donald Trump to close the so-called de minimis loophole, a tax exemption that allowed companies to ship goods under $800 into the US without paying import duties. Their throttled sales are largely because of President Donald Trump's policies. In April, the President killed the de minimis loophole, a tax exemption that allowed retailers selling items less than $800 to skirt tariffs on Chinese goods. Shein and Temu relied heavily on that carveout to flood the US with low-cost goods, including $3 t-shirts, $15 sneakers, even $100 appliances — all shipped straight to shoppers' doors. But the policy change is straining their pricing advantage. 'Higher prices have deterred shoppers, but the pullback in advertising, particularly by Temu, has also resulted in it dropping off the radar of a lot of consumers,' Neil Saunders, a retail expert at GlobalData, told 'The sudden change in fortunes shows that most consumers were not very loyal to either platform; they just liked the low prices.' Among legacy retailers, those rock-bottom prices were a looming threat. Forever 21 — itself once a fast fashion disruptor — partly blamed Shein and Temu's rise for its latest bankruptcy. The mall staple shuttered all of its stores earlier this year. But now, as Shein and Temu stumble, other retailers are picking up steam. Amazon's women's clothing category grew 26 percent over the last six months. The e-commerce giant is also leaning into the same fulfillment model that Shein and Temu once dominated — working with China-based third-party sellers to keep prices competitive. Other beneficiaries of the shake-up include Dollar Tree, Target, Walmart, Five Below, Zara, Asos, Aeropostale, Nordstrom Rack, and even discount retailers like Ollie's Bargain Outlet. 'Customers have migrated in a number of directions,' Saunders added. 'Shein and Temu won't completely disappear from the US, but the days when they were generating extraordinary growth are behind them.' To stay afloat, Temu is adapting. The company says it's transitioning to a US-based fulfillment system, working with more domestic sellers to avoid international shipping taxes. At the same time, both brands are leaning into growth overseas. Temu's sales in Europe jumped 60 percent in May alone, with France seeing a doubling of purchases. Shein saw a surge in UK and EU markets, too. Analysts expect both companies to keep shifting their supply chain strategies to regain pricing power in the US. But that won't be easy. Global trade tensions, especially between the US and China, remain in flux.
The Independent
2 hours ago
- The Independent
Trump warns countries with ‘anti-American policies' will see tariffs rise
Donald Trump threatened to impose an additional 10 per cent tariff on any nation aligning with the 'Anti-American policies' of the Brics group. The threat was issued via a Truth Social post during the Brics annual gathering in Brazil, where leaders had warned against rising tariffs and protectionism. The Brics group, which includes Brazil, Russia, India, China, and South Africa, has expanded its membership and represents over half the world's population and 40 per cent of its economic output. China responded by stating it opposes tariffs as a tool of coercion, while South Africa argued it is not anti-American and is seeking a trade deal with the US. Trump's administration is reportedly aiming to finalise numerous trade deals before a 9 July deadline for imposing significant 'retaliatory tariffs'.
