Starbucks and Alibaba are teaming up on coffee delivery in China. According to Reuters, Starbucks is trying to regain its footing after a sales slump in the country; Starbucks quarterly sales in China declined 2 percent in the period ended on July 1, down from the 7 percent growth in the same period a year earlier.
While Starbucks declined to comment, it is believed that a formal announcement will be made later this week.
Last month, it was reported that, just weeks after boasting about its expansion in China, Starbucks was seeing a slowdown that it’s now blaming on third-party delivery services. Starbucks also saw a decline in third-party companies that place big orders for delivery to their customers, which had been resulting in long in-store lines.
“I think it was driven by the government to want to stop having third parties do that because it was creating annoyances,” said Chief Executive Kevin Johnson on a call with analysts, according to Reuters. He said the way to fix it is to ink a delivery partnership with a “large tech company” by the end of 2018.
In addition, competition from rivals like China’s Luckin Coffee — which has already opened more than 660 locations in 13 Chinese cities since launching in January — has also hurt Starbucks. In its third quarter earnings call, Starbucks admitted to an “underperformance” in China, and said it was working toward plans for delivery, starting this fall in Beijing and Shanghai.
The announcement of a partnership with Alibaba’s food delivery arm, Ele.me, will hopefully give Starbucks a boost in the country, especially since the company wants to almost double its number of stores in China by 2022.
“An imminent announcement of a delivery solution is an important first step, as is a roll out of mobile ordering,” which is not yet in China, according to Sharon Zackfia, an analyst for William Blair.