Why Starbucks is lowering prices in China
What's the story
Starbucks has announced a price reduction for some of its iced drinks in China.
The move comes as part of the company's strategy to remain competitive amid growing market rivalry and changing consumer spending habits.
The new pricing strategy will see an average reduction of CNY 5 (around ₹60) across a range of beverages, including non-coffee options and Frappuccino variants.
Market dynamics
China's coffee market is highly competitive
Despite being Starbucks's second-biggest market after the US, China has a highly competitive coffee industry.
Domestic rivals like Luckin Coffee and Cotti have been offering drinks at prices as low as CNY 9.9 (around ₹117).
Even deep-pocketed internet companies JD.com and Alibaba Group have entered the food delivery space, further intensifying competition in this sector.
Plan
Starbucks wants more customers during afternoon
As per Reuters, the company isn't cutting prices due to fierce competition but rather to draw more customers during afternoon hours.
Speaking to the publication, an insider who wished to stay anonymous said, "Starbucks likely has a longer-term strategy, which is to focus on the demand for non-coffee items in the afternoon among consumers."
Strategy
No plan of getting into price war
Starbucks had previously maintained that it wouldn't get into a price war.
However, the company has already made some changes to its pricing strategy by introducing smaller-sized drinks and issuing coupons for customers.
These measures have effectively reduced prices for consumers without directly engaging in a price war with competitors.