Starbucks joins China price war with discounts for tea drinks

[BEIJING] Starbucks on Monday (Jun 9) announced price cuts for a slew of its tea-based beverages at its stores across China, as the American coffee chain takes a more aggressive approach to revive sales at its second-biggest market.

Starbucks will reduce prices by 5 yuan (S$0.89 cents) on average across more than a dozen Frappuccino, iced tea and tea latte options in its latest campaign to appeal to Chinese consumers for non-coffee offerings during summer, according to a statement posted on the company’s official account on Chinese social media WeChat on Monday.

“Improved ‘non-coffee’ product matrix will go side by side with core coffee offerings to better meet the diversified needs of customers,” said Starbucks China chief growth officer Tony Yang in the statement.

It is rare for the US coffee giant to promote price cuts on its own official social media channels as the chain has long defended its premium positioning in China amid rising competition from cheaper rivals. Persistent price wars across product categories from autos to fast food have pushed China’s consumer prices into deflationary territory for four months in a row, according to government data released on Monday.

Starbucks’ push to offer more tea-based beverages in China stands in contrast to chief executive officer Brian Niccol’s effort to turnaround the US business by streamlining its menu to emphasise coffee. Still, the push for more tea drinks in China could help the US company contend with local tea chains to win back customers in the world’s second-largest economy.

With the newly announced price cut, Starbucks said consumers can sip a cup of tea drink for as little as 23 yuan in its spacious lounge-like coffee shops. That brings its prices closer to those at more upscale local tea chains, which often make their beverages for customers to grab on the go. BLOOMBERG