On January 31st, Starbucks announced its Q1 2024 financial performance. During the reporting period, Starbucks achieved a revenue of $9.4 billion (excluding the impact of exchange rate fluctuations), a year-on-year increase of 8.16%; A net profit of 1.024 billion US dollars was recorded, a year-on-year increase of 19.78%. Starbucks China saw a 20% increase in revenue to $735 million (excluding exchange rate fluctuations), a 10% increase in same store sales, and a 21% increase in same store transaction volume during the reporting period.
The county-level market in China provides great imagination space for the growth of coffee brands such as Starbucks, and expanding into lower tier markets is what Starbucks is doing in recent years.
According to the financial report, the company added a net of 169 new stores in China and entered 28 county-level markets during the reporting period. This year marks the 25th anniversary of Starbucks entering the Chinese market. Currently, the number of Starbucks stores in the mainland Chinese market has exceeded 7000.
Starbucks CEO Nasihan said that Starbucks will explore more blank markets in China. "We are accelerating the pace of market sinking and opening our stores in more new county towns in China."
Starbucks China Chairman and CEO Wang Jingying said, "As of the first quarter, we have only entered 857 out of nearly 3000 county-level and above cities in China. In the past few years, our new store profitability in county-level markets has also been better than that in first tier cities. Therefore, we will continue to accelerate our sinking and enter more county-level markets."
In addition to increasing the number of stores, Starbucks' localization strategy in China is also reflected in the investment industry chain.
On September 19, 2023, Starbucks China Coffee Innovation Industrial Park was completed and put into operation in Kunshan, Jiangsu. This means that China has taken the lead in achieving large-scale integration of the vertical industry chain from raw beans to coffee in Starbucks' global markets. During the construction period of the industrial park, two additional rounds of investment were added, with a total investment of 1.5 billion yuan (approximately 220 million US dollars), which is Starbucks' largest investment in building a coffee production and logistics base in China.
When many coffee brands joined the price war in 2023, Starbucks expressed no interest in it. Wang Jingying said, "Starbucks has no intention of participating in a price war. We focus on achieving high-quality, profitable, and sustainable growth. Since Starbucks pioneered a high-end coffee experience in China 25 years ago, our goal has always been to be the best and first in this market."
There is indeed a lot of room in China's coffee market. Recently, the World Coffee Portal released a report showing that in the past 24 months, the number of stores in the East Asian branded coffee shop market has increased by 12%, reaching 119000, with the Chinese market accounting for 42%. China has surpassed the United States to become the world's largest branded coffee shop market, reaching 49691.
Zhu Danpeng, Vice President of Guangdong Food Safety Promotion Association, previously told First Financial reporters that in 2023, the demand for coffee in the third to fifth tier markets is a new growth point in the Chinese coffee market. In recent years, the development of regional county economies, the rise of young people in small towns, and the return of talents from the high-end market have accelerated the growth of the third to fifth tier coffee market, and also allowed the coffee industry to enjoy the dividends brought by market sinking.