Over 21 billion yuan! There are more and more options for drinking coffee, but Starbucks, a well-established coffee giant, has still retained more customers.
On October 31st, Starbucks released its financial reports for the fiscal year 2024 and fourth quarter. In the fourth quarter (July 1st to September 29th), Starbucks China achieved a net revenue of 783.7 million US dollars (approximately 5.595 billion yuan), an increase of 6% compared to the previous quarter after adjusting for exchange rate fluctuations; In the fiscal year 2024, Starbucks China's net revenue reached $2.958 billion (approximately RMB 21.109 billion).
As of September 29th, Starbucks' membership size in China has reached nearly 140 million. In the past two years, the coffee price war has been raging, and price competition is indeed the most direct and effortless way to compete for customers, but it can also easily lead companies into a vicious cycle of constantly lowering prices to retain customers. Starbucks does not want to sacrifice operating profits for sales revenue. While maintaining stable revenue and continuously growing membership, Starbucks has maintained a double-digit operating profit margin throughout the fiscal year.
It can be seen that Starbucks actively transcends the transformation of the coffee industry and explores a high-quality, profitable, and sustainable development model. What is Starbucks' secret to retaining customers?
Breaking multiple store opening records
Our stores cover nearly 1000 county-level markets
Let's take a look at Starbucks' latest report card first. In the fourth quarter of this year, Starbucks China achieved a net revenue of 783.7 million US dollars, with store transaction volume increasing month on month, and operating profit and operating profit margin increasing month on month.
Starbucks is still continuously opening stores and sinking. In the fourth quarter, Starbucks added a net of 290 stores and entered 78 county-level markets. As of September 29th, Starbucks China had 7596 stores, covering nearly 1000 county-level markets.
In terms of opening stores, Starbucks has broken multiple records of its own. Throughout the 2024 fiscal year, Starbucks China added 790 new stores, a year-on-year increase of 12%, setting a new historical high; Newly entered 166 county-level markets, setting a new historical high, with the number of newly entered markets nearly doubling compared to the previous fiscal year; Half of the newly added stores are located in lower tier cities (third tier and below cities), and the proportion of newly added stores in lower tier cities has reached a historical high.
Starbucks is also popular among consumers in the lower tier market. The business performance of its newly opened stores in low tier cities and new county level cities continues to be better than that of newly opened stores in high tier cities.
Starbucks' membership continues to grow. In the fourth quarter, Starbucks China added 1.5 million active members to its Star Enjoy Club, reaching a record high of 23.5 million active members. The frequency of visits from the most loyal customers is higher, and the consumption frequency of Diamond Star and Gold Star members has increased both year-on-year and month on month. As of September 29th, the total membership size of Starbucks China has increased to nearly 140 million, with a year-on-year increase of 3.9% in the proportion of member sales, accounting for 74.4% of total sales.
In the fourth quarter, Starbucks China continued to adopt targeted promotional strategies, creating new sales growth and cultivating customers' consumption habits. For example, the promotion during the afternoon tea period not only brings new sales growth, but also increases the number of customer transactions.
Regarding the latest performance, Liu Wenjuan, CEO of Starbucks China, pointed out that "the Chinese coffee market continues to undergo profound changes, with frequent promotions and collective pressure on the entire industry, which has affected our same store sales. However, it is exciting that the changes in the industry environment have further forged our strong operational capabilities, enabling us to achieve month on month growth in key areas such as net income, store transaction volume, operating profit, and operating profit margin. The operating profit margin for the entire 2024 fiscal year has maintained a healthy double-digit trend. This not only demonstrates our strong single store profit model, excellent operational ability, and financial discipline, but also an effective result of our high-quality, profitable, and sustainable growth strategy. Our confidence and commitment to the Chinese market remain firm, and we will continue to adhere to a long-term development approach and overcome industry changes
78 new products launched in one year
Generation Z enters Starbucks
Starbucks has shown off its muscles, but behind this report card, Starbucks is actually constantly seeking change.
Coffee shops want to attract customers to pay, and delicious drinks are the top priority. In addition to a variety of classic products, Starbucks' menu is becoming increasingly diverse. In the fourth quarter, it launched a total of 22 new products, and in the 2024 fiscal year, it launched a total of 78 innovative drinks. These innovative products have also expanded Starbucks' consumer circle, and some post-95s and post-00s have started to frequently visit Starbucks for new products.
In September this year, after gathering the creative inspiration of 151 partners (baristas) and carrying out the idea and creation for a month, Starbucks launched three seasonal drinks with concentrated local flavor: Yanzhao Chestnut Red bean soup Latte, Qin Jin Fire Crystal Persimmon Star Bingle, and Bamin Grapefruit Tieguanyin Tea Latte.
Prior to this, Starbucks distributed 6000 questionnaires to its partners nationwide, inviting them to explore creative ideas for beverages. Eventually, a "think tank" consisting of 151 partner representatives participated in the inspiration collision. These baristas span across the east, west, north, and south of our country, carefully selecting the unique flavors of their hometowns and incorporating urban inspiration and the essence of ingredients into their blended drinks.
In addition, this year, Starbucks also brought products such as Golden Roast Concentrate, Yilanduo, Soft Snow Star Bingle, and Mountain style Milk Series. The mainstream flavor in the Chinese coffee market is "deep roasting", while Starbucks is trying to introduce golden roasted espresso, which has a bright citrus flavor, rounded taste, and soft smoothness, providing customers with a new choice and hoping to stimulate more customers' attempts and love for light roasted coffee beans.
Since its birth in 1994 and introduction to the Chinese market in 1999, Xingbingle has remained the entry-level coffee beverage for many young customers. This year, Starbucks' newly launched Soft Snow Frappuccino inherits the refreshing and pleasant taste of traditional Frappuccino, and innovates in beverage ingredients and processes, bringing a rich and mellow, layered, and unprecedented taste experience.
In addition to these innovative products aimed at nationwide stores, in fact, in order to make better coffee, Starbucks has introduced premium stores and premium coffee in China since 2014. This is more like Starbucks' advanced laboratory, where every Starbucks premium coffee that has obtained "experimental" certification is very special and rare, so it is only sold in a small number of premium stores.
Starbucks believes that good coffee not only depends on its flavor, but also on every step from coffee cultivation, procurement, roasting to production. Every year, Starbucks' "bean hunters" travel around the world in search of high-quality Arabica coffee beans, and only a small number of Arabica coffee beans are awarded the title of Starbucks Select. Zhenxuan Coffee is handmade by coffee masters who are skilled in using various exquisite brewing methods such as hand brewing and siphoning to present the unique charm of Zhenxuan Coffee to customers one by one. As of September 29th, Starbucks has 764 premium stores nationwide.
Open intangible cultural heritage stores and pet friendly stores
Starbucks leverages third space to create more possibilities
Coffee comes first, but when people go to Starbucks, it's not just about wanting a cup of coffee, and Starbucks itself isn't just about selling coffee.
When it comes to Starbucks, it naturally cannot be separated from its introduction of the concept of "third space" in coffee operations. However, as the competition in the beverage market becomes increasingly fierce, different voices have emerged regarding this concept.
American sociologist Ray Oldenburg proposed that the place of residence is the "first space", the place of work is the "second space", and the "third space" is an informal public gathering place outside of residence and workplace. Starbucks hopes to use coffee as a medium and transform its stores into leisurely and relaxing places for people.
This concept has gradually become well-known with the increase of Starbucks stores. In the past few years, many tea and coffee brands have also tried to create store types with a "third space". However, the expansion of area and the increase in operating costs are tests for operators. Some brands have "picked up" this concept but put it aside. At the same time, in order to quickly occupy the market, many brands attach more importance to lightweight small shops. As small as one or two square meters, they can open a beverage store that can be done, picked up and left immediately, and the order volume is not low. Therefore, there is a voice saying: Do people really need such a place to drink and chat at the same time?
Despite doubts, if you take a walk around Starbucks stores, you will find that at different times, the stores are still filled with various types of customers, some chatting, some sitting and resting, and some working. Space needs still exist. Starbucks' unchanged original intention is to be a coffee shop where people can gather warmly. So, focusing on the diverse needs of customers, Starbucks' store types in China are becoming increasingly diverse.
Starbucks incorporated Chinese intangible cultural heritage culture and skills into the design of its stores. In June this year, it opened the third national intangible cultural heritage concept store in Suzhou. The Arhat table, the beauty lean, and the corner of the Soviet style architectural structure make people feel as if they are in Suzhou gardens. Starbucks also boldly collided the intangible cultural heritage skills across the country with Suzhou's local intangible cultural heritage culture. At the entrance of the store, an art installation consisting of 70 pieces of Suzhou embroidery was hung, of which 45 pieces were from 15 rural intangible cultural heritage teams supported by the Beijing Starbucks Foundation, showing 15 intangible cultural heritage skills.
Starbucks also provides convenience for pet owners to dine out. In 2018, Starbucks opened its first pet friendly store in China, which provides dedicated pet rest and activity facilities in outdoor areas, as well as free exclusive fresh whipped cream drinks suitable for pets. As of the end of October, Starbucks has opened approximately 380 pet friendly stores in China.
Starbucks also provides more employment opportunities for people with hearing impairments. In 2019, its first sign language store opened in Guangzhou, equipped with a new ordering system, including handwriting boards for communication, handheld menu boards, double-sided ordering displays, etc., to achieve barrier free communication between hearing-impaired employees and customers. As of the end of fiscal year 2024, Starbucks has opened 19 sign language stores in China.
In addition, Starbucks also combines different community styles to open stores with different characteristics. If the store is opened in the Anaya Art Center, it integrates the characteristics of the Anaya Coast in terms of spatial structure; The store located in Nantou Ancient City, Shenzhen, combines the antique charm with three distinct and meaningful colors: green, red, and yellow. There are also several carefully decorated items that echo the local culture inside the store.
It should be said that the "third space" has created more possibilities and imaginative space for Starbucks, allowing it to continuously expand and enrich its functions, giving it the opportunity to open top-level baking workshops, premium stores for coffee tasting audiences, green stores, and more. People at Starbucks are not just drinking a cup of coffee.
Organize a barista competition to support Yunnan coffee industry
Starbucks is not limited to the cup of coffee in front of us
Starbucks has been in the Chinese market for 25 years, and beverages and stores are people's most direct perception and cognition of Starbucks. In addition to these, Starbucks actually has many unknown aspects in promoting the development of the domestic coffee industry.
For example, a long time ago, every Starbucks store in China began to hold an "coffee room" activity irregularly. At this activity, customers or fans can taste Starbucks' core coffee beans or seasonal coffee beans for free. The partners of the store will discuss coffee related knowledge with Dim sum by hand, which not only deepens the connection between Starbucks and customers, but also enables many consumers to have a deeper understanding of coffee.
After attending the "Coffee Classroom," a consumer bluntly said, "This event has opened up new horizons for me. Not only can I experience the story behind coffee, but I can also drink coffee from the whiskey brewing series, which is very surprising
For example, in order to motivate internal employees and form a competitive advantage, Starbucks also regularly holds the Starbucks Barista Competition. Since the first competition was held in 2009, this year is the eleventh edition. This competition attracts top barista partners from across the country every year. The competition is divided into four major events: "Coffee Ambassador Competition", "Coffee Brewing Competition", "Classic Latte Art Competition", and "Peak Latte Art Competition". Each event has a high test for baristas, and the most eye-catching one is the "Coffee Ambassador Competition", which will select the "National Coffee Ambassador" who represents the highest honor. The winners will be able to wear a "brown apron".
This kind of competition not only inspires Starbucks employees to constantly pursue progress, but also provides a large number of outstanding talents for the coffee industry. A coffee industry insider once pointed out, "Chain brands like Starbucks have cultivated a large number of coffee professionals for the market. In the entire Chinese coffee system, according to my observation, at least half of the middle and senior positions have work experience at Starbucks
In addition, Starbucks has also invested a lot of funds and energy to jointly develop with the domestic coffee industry chain. In order to harvest coffee beans that meet the standards in Yunnan, Starbucks established the first coffee grower support center in the Asia Pacific region as early as 2012, dispatching agronomists to provide free training for local coffee farmers. Since 2018, Starbucks has launched five consecutive Yunnan public welfare projects, with a total committed investment of nearly 45 million yuan, covering more than 30 coffee planting villages in Yunnan Province, directly benefiting more than 10000 coffee farmers. It has provided production and processing equipment and skills training for coffee farmers, introduced digital measures for smart agriculture, improved production efficiency, and combined the "primary, secondary, and tertiary industries" to create a coffee tourism integrated rural revitalization model, until activating the sustainable development momentum of villages around "talent and culture".
On October 19th, at the 6th Starbucks Yunnan Green Bean Excellent Supplier Conference, Liu Wenjuan, CEO of Starbucks China, announced that Yunnan coffee beans will be included in all Starbucks classic espresso used in China in the future. According to data disclosed by Starbucks, the pass rate of Yunnan coffee beans through Starbucks' strict quality testing has increased from 20% in 2012 to 80% today.
Whether it's the upstream coffee beans, the cultivation of baristas, or the dissemination and popularization of coffee culture, all stem from Starbucks' adherence to long termism. Starbucks sees more than just the cup of coffee in front of them.