Another factor which is definitely not being ignored is in China, big e-commerce firms offer consumer subsidies to stimulate their food delivery and “instant retail” businesses, referring to deliveries made within one hour. These subsidies and coupons have pushed the price of a cup of coffee even lower, meaning consumers are often paying less than 5 yuan per cup of coffee delivered to their door.

Amid this kind of competitive environment that consumers are tightening their purse and ever-cheaper options from fast-growing rivals made Starbucks more difficult to justify prices of around 30 yuan ($4.20) per cup of coffee. In another words, price pressures have increased significantly, which is further squeezing the profit of Starbucks.

Earlier in July, Starbucks announced its first-ever price drop in China, lowering the price of some non-coffee iced drinks by an average of 5 yuan in response to the fierce price war. Domestic rivals such as Luckin Coffee and Cotti have priced their drinks as low as 9.9 or even 8.8 yuan, while e-commerce giant JD.com and Alibaba have engaged in the food delivery market, which is fueling the competition. With offers and vouchers, Chinese coffee consumers can buy themselves a drink for as little as 2.9 yuan.

Generally speaking, Starbucks is not in a good position in China market right now. Fierce competition, sluggish growth as well as price-sensitive consumers are headwinds facing Starbucks, which make Starbucks in a dilemma situation. Some rumours indicated that Starbucks kicked off a formal sale process of its China operations in May, it is not clear whether to sell a controlling or a minority stake in its China business, or whether it will keep some parts of its China operations such as its supply chain.

Although Starbucks has not confirmed the details of the sale process, the rumour is definitely reflecting the operation of Starbucks is in a turningpoint in Chinese market. How to grappling with the complicated business environment is the key point for Starbucks to sustain its growth in Chinese market down the road.

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