A few things on my radar #6
Starbucks; Yao Ming; Mixue
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Starbucks
Despite major product and pricing adjustments, Starbucks' business in China continues to decline
Since the pandemic, Starbucks' Chinese market performance has been struggling to recover. The rise of local and specialty brands, combined with more cautious consumer spending, has dented sales for three consecutive quarters.
To revive its business in the market, Starbucks launched a major initiative in early 2024 —strengthening its products while offering discounts to rebuild competitiveness. However, these measures failed to reverse the downward trend — their same-store sales fell 14 percent. in China during the fiscal Q4, which was driven by a 6 percent drop in comparable transactions and an 8 percent decline in the average ticket price.
Local coffee chains compete aggressively on price. In Beijing, a small latte that costs $4.22 at Starbucks goes for $2.25 at Luckin, $1.75 at Cotti, and $2.11 at Manner, as reported by CNBC ( Note: CNBC analysts don't seem to have seriously tried coffee in China - how could Manner possibly be cheaper than Luckin? The fact is — Manner's $2 latte they mentioned is only 237 ml, while their large latte (350ml) at $3 is actually comparable to Starbucks' small latte (350ml) at est. $4.)
Moreover, Chinese coffee chains maintain customer interest by frequently updating their menus and creating innovative drink combinations extending far beyond traditional cappuccinos. This variety allows coffee drinkers to find options matching both their tastes and budgets.
“Chinese consumers are very spoiled in some ways because it is a very competitive market and all the suppliers are trying to make consumers happy with new launches,” said Nancy Zheng, a partner at Bain in Shanghai.
Recent earnings reports reveal that Starbucks is still facing significant challenges in a highly competitive market.
Even after price reductions and product updates, same-store revenue and sales continue to decline, proving that product competitiveness is still insufficient. If there's no more room for price adjustments, then the focus needs to be strongly on the product itself.
One barista in Suzhou explained:
"Starbucks used to be the one who got us all into coffee here in China, but they're not really a trend leader anymore. Local coffee shops are crushing it with better drinks. If you're watching your wallet, you'll grab your coffee from Luckin or Cotti, and if you're really into coffee, you'll head to Manner or other specialty coffee stores. These days, people mostly just go to Starbucks when they need a comfortable place to sit."
Local cafes now offer superior drinks at lower prices. With these abundant choices, Starbucks has lost its position as consumers' preferred coffee destination.
To regain its market position, as I said in my previous article, Starbucks must improve both its product quality and market proposition, rather than relying on discounts and minor innovations. Without these fundamental changes, the company risks losing its influence on Chinese consumer preferences and becoming trapped in an endless price war.
Yao Ming
Yao Ming Steps Down as Chinese Basketball Association (CBA) Head After Seven-Year Tenure
NBA legend Yao Ming stepped down in October 2024 as head of the CBA after seven years, following the national team's poor performances—including failure to qualify for both the Tokyo and Paris Olympics.
“Unfortunately, the results and performance of the national team did not meet expectations,“ Yao told state media. “The reason why I chose to leave the Chinese Basketball Association at this time is mainly based on considerations for the future of Chinese basketball.”
"Yao was just made a scapegoat for the problems that have accumulated in the men's basketball system over the past few decades," said one Yao supporter.
Meanwhile, many online critics point to Yao's leadership style and unfamiliarity with local context. "Yao excels as a player but struggles to lead, especially since Western approaches don't translate directly to China," noted one critic.
Since Yao's retirement, no Chinese player has matched his achievements. Most recently, Cui Yongxi, a promising Gen-Z basketball player who joined the NBA in September 2024, was waived by the Nets in December 2024 due to injuries, cutting short his NBA career. Currently, there are no Chinese players in the NBA.
As I mentioned previously, the CBA faces chronic issues with no easy solutions.
Yao became entangled in CBA's bureaucratic challenges. His NBA-inspired reforms faced opposition from established interests and lacked public support. Despite pressure for quick results from officials and fans, structural resistance and limited talent pool prevented his changes from yielding immediate improvements.
Given Yao's unmatched basketball expertise and experience, finding a more qualified successor will be difficult. With the strong institutional resistance to reform, Chinese basketball will likely continue facing significant challenges—regardless of who takes the helm next.
For Yao, this could be a blessing in disguise—he can finally break free from this mess and enjoy himself. Congratulations, Yao!
MiXue（蜜雪冰城）
Early this month, China's largest bubble tea chain, Mixue, is seeking an IPO in Hong Kong to expand production
According to Mixue's prospectus, Mixue leads global bubble tea chains with the highest number of stores. The company operated over 45,000 stores across China and 11 other countries as of September 30, 2024. Its annual revenue exceeded $700 million, with growth rates of 50% in 2023.
Besides Mixue, the second largest Chinese bubble tea chain, Guming (古茗), which operates around 9,000 stores, also submitted IPO applications in January.
A few months ago, another industry giant, ChaBaiDao (茶百道; HKG: 2555), with over 8,000 stores, became listed on the Hong Kong stock market. Though its stock price initially dropped sharply, it has since rebounded to its original IPO price.
According to the China Chain Store & Franchise Association's market analysis, China's bubble tea sector demonstrated substantial market presence, reaching an estimated valuation of 145 billion yuan ($20.4 billion) in 2023.
As the world's largest tea producer, China accounts for almost half of global tea production. Considering the well-established supply chain, online and offline channels, and vast consumer demand, it's not surprising that numerous bubble tea brands have emerged within China.
What I find particularly interesting about this industry is that it's very similar to coffee — the raw materials are agricultural products that are fermented or roasted before being made into various beverages. So, I wonder, why hasn't this industry produced a giant like Starbucks yet? Does China have the opportunity to create its own bubble tea version of Starbucks?