Starbucks Sales Drop by 23%! Why Are Young People Turning Away from Starbucks?

On May 3rd, local US time, Starbucks released key financial data for the second quarter of fiscal year 2022 (for the 13-week period ending April 3, 2022), showing that Starbucks' overseas market performance was dismal. Affected by the significant decline in its second-largest market—China—international same-store sales decreased by 8%.

With the re-implementation of lockdowns after the COVID-19 pandemic, China's same-store sales declined by 23% this quarter, burdened by a 20% decrease in same-store sales volume and a 4% decrease in average customer spending. A Starbucks executive stated that among the Chinese cities where Starbucks operates, 72% experienced outbreaks of the Omicron virus this quarter.

During the 13 weeks of the second quarter, approximately one-third of Starbucks stores in China were temporarily closed or only accepted mobile orders, payments, or delivery orders. Belinda Wong, Chairman of Starbucks China, stated: "Due to the duration of Shanghai's lockdown and the further resurgence of the virus in other cities including Beijing, it is expected that the group's third-quarter performance will be more significantly impacted." Although Starbucks China will face greater impact in the third quarter, Wong remains optimistic about the Chinese market and stated that Starbucks' pace of expansion in China continues.

According to data released for the second quarter of fiscal year 2022, Starbucks added 97 new stores in China and will continue to focus on growth, with the expectation of operating 6,000 stores in China by 2022. As of the end of the second quarter, stores in the United States and China accounted for 61% of the group's global portfolio, with 15,544 stores in the United States and 5,654 in China.

The Discussion Behind Starbucks' Decline

The decline in Starbucks China's sales sparked heated discussions among netizens, leading to a trending topic on Weibo about "Why young people look down on Starbucks." Some netizens believe that product pricing and innovation, brand image and positioning, industry competition, and consumption habits are reasons for the decline, while others believe: it's not about looking down on it, but about not choosing it.

Starbucks' product pricing has always been the most discussed topic among general consumers, with "expensive" becoming a highly representative label for Starbucks. For general consumers, when choosing between the same type of beverage, they will definitely choose a coffee brand with similar taste and more favorable unit price. Today, there are many chain coffee brands in the domestic market, and small independent cafes are also spread across streets and alleys. Coffee has gradually penetrated people's hearts, and everyone's perception of coffee has gradually become daily routine. Whether a coffee brand is well-known is no longer the first step for everyone when choosing coffee.

Challenges in Innovation and Brand Image

Facing the current market's demand for coffee innovation, Starbucks appears significantly "behind" in launching new products. The long-standing practice of simply changing flavored syrups = new products can no longer satisfy consumers' demands for beverage innovation, and the appearance of the finished products also fails to attract more consumers' attention.

Starting from last December, incidents affecting Starbucks' brand image have occurred one after another, especially food safety issues and the incident of expelling police officers, which not only attracted public criticism but also lost more potential customers, while also disappointing a group of loyal consumers with the brand.

The Impact of the "Third Space" Disappearance

Also due to the impact of the pandemic, some Starbucks locations were unable to provide dine-in services, which affected sales. Starbucks has always attracted business professionals by providing a comfortable "third space," and people choose Starbucks because of the environment for business talks, work, and study.

The inability to provide dine-in services means the "third space" has disappeared. Therefore, even though Starbucks offers delivery services or online ordering with in-store pickup, it will lose many business customers. Combined with its price positioning, it cannot attract new consumer groups during this period.

Changes in Coffee Consumption Habits

In addition to Starbucks, many coffee shops have experienced significant sales declines because the pandemic has changed people's coffee consumption habits. Previously, people would习惯ually go to coffee shops to sit down, enjoy the relaxed atmosphere brought by the café environment, and find healing in watching the barista brew coffee.

Now, to make it convenient for people to drink coffee without leaving home, many products that can easily make a cup of coffee have been launched on the market, such as freeze-dried coffee, coffee liquid, and hang-drip coffee. There are also many DIY coffee tutorials online, which has allowed many friends who don't pursue specialty coffee to establish "coffee mini-bars" at home. Besides being able to express their creativity and improve their hands-on skills, the production cost is also much cheaper than finished products from coffee shops.

With the widespread popularization and dissemination of coffee culture and specialty coffee knowledge, more and more friends want to further study coffee. Where there's demand, there's supply. Besides the increasing variety of coffee beans, there are also more choices in coffee brewing equipment. Whether you're a coffee beginner or a coffee researcher, you can obtain coffee equipment suitable for you.

The learning of coffee knowledge and brewing techniques is no longer limited to boring theories and texts. With more people's research, understanding, and simplified explanations, coffee brewing is no longer as complex as people imagine. Enjoying the coffee brewing process has also become a healing moment for many friends.

Consumer Choice and Brand Positioning

As netizens have said, it's not about looking down on it, but about not choosing it. Coffee is inherently a daily beverage. Consumers can choose brands that suit them, and brands can also choose suitable customers. Starbucks may not suit the tastes of some young Chinese people, but this doesn't represent everyone.

Because not everyone knows or understands coffee, for many people who don't pay attention to coffee or don't drink coffee often, Starbucks remains the best choice for drinking coffee. The brand's influence allows non-coffee drinkers to associate Starbucks when coffee is mentioned. Even people who don't know coffee have heard of Starbucks.

Image source: Internet, Xiaohongshu, Weibo

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