International

Starbucks Expects To See Slowing Growth In China

Starbucks has, once again, warned that its China comparable sales could rise 1 percent during the fiscal year.

“We have picked up the pace of new unit development, and with that comes cannibalization,” said Chief Financial Officer Patrick Grismer, according to Bloomberg. “We’re effectively doing it to ourselves. We’re doing it intentionally in the interest of growing total transactions and total sales,” while he admitted that more competition and slowing economic growth are also having an impact on its bottom line.

The company, which is opening a location in China about every 15 hours, has announced slower growth in the country over the past 18 months, reporting a negative comparable sales quarter there last year. The company’s main goal is to add about 600 new cafes this year to its current count of 4,125.

The coffee giant’s plans in China follow the same rapid growth it exercised in the U.S., opening stores so quickly that sales couldn’t keep up. As a result, the company closed about 150 stores in densely penetrated U.S. areas in its last fiscal year.

Starbucks also faces tough competition in China. In August, Chinese coffee startup Luckin Coffee announced it is on pace to become the biggest coffee company in China this year, opening 593 new stores in Q2, with 2,963 in total. However, its rapid expansion has led to deep losses. Luckin’s expenses, which came from opening new stores (including marketing and operations) totaled $232.9 million during the quarter — tripled from a year ago.

In the meantime, Starbucks is finding new ways to fight off its rivals. Earlier this year, it launched Starbucks Now in China, a program that lets people order food and drinks ahead of time, then pick up their orders.

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