Starbucks Battles Complaints, Sinking Mooncake Sales, and Leadership Changes in China

Starbucks (SBUX) shares fell 3.35%.
On August 28, it was reported that the Starbucks China subsidiary faced an increase in complaints, tallying 46 cases in the past month, a 21.05% increase from the previous month. The complaint resolution rate stood at 47.83%.
In 2023, the Mid-Autumn Festival saw no better luck with Starbucks’ mooncakes. The hashtag #StarbucksMooncakesCantSell on social media highlighted issues like high pricing and unsatisfactory sales targets. Employees resorted to various strategies, including offering discounts and adding freebies, to push sales.
This situation isn’t new. Last year, similar issues arose when employees were allegedly required to buy mooncakes to meet targets. Despite a quick denial and policy change from the company, the reality of poor sales persisted.
This year, in efforts to stimulate sales, Starbucks introduced new products and slashed prices significantly. However, mooncakes priced previously at 598 yuan for a box of ten now faced significant markdowns, with some boxes being offered for as low as 190 yuan with discounts.
On a related note, Starbucks also ventured into online coupons and promotions through its app, providing various discounts in hopes of boosting sales. The mooncake market competition remains fierce, and Starbucks’ struggle to maintain footing is evident.
Financially, Starbucks has also been facing challenging times. In their latest quarterly report, net profits were down 7.55% year-on-year to $10.56 billion, and total revenue declined by 0.59% to $91.14 billion. Notably, revenue from China decreased by 11%, emphasizing the significant downturn in its key market.
Following the disappointing financial results, Starbucks announced a change in leadership. Brian Niccol, previously the CEO of Chipotle, is set to take over as the new CEO. This move was received positively by the market, with Starbucks' stock jumping 24.5% following the announcement.
With continued competition from local brands like Luckin Coffee, Starbucks faces increasing pressure to innovate and adapt to changing consumer demands in China. The task ahead for Niccol is clear: revitalize Starbucks’ presence in one of its most crucial markets.
Starbucks must also contend with the challenging landscape in the US, where consumer preferences are shifting and competition intensifies. Adjustments in product offerings, pricing strategies, and operational efficiency will be crucial for Starbucks to regain its competitive edge.
Starbucks’ iconic status as a high-end coffee brand is under threat. The company needs to rethink its approach, leveraging both its global brand strength and local market insights to win back customers and sustain growth.
As Niccol steps into his new role, the strategies he implements could determine Starbucks' ability to navigate these turbulent times effectively and retain its market leadership.