Starbucks seeks to change its China image from a morning coffee venue to an all-day beverage vendor

On a rainy Tuesday afternoon, customers at a Starbucks outlet in Shanghai's Wujiaochang area were greeted with changes on the price list: Non-coffee items were marked down by an average 5 yuan (70 US cents) to help transform the chain's image. China is Starbucks' second-largest market, with 7,758 outlets.

Famous as a venue for signature morning coffees, Starbucks is finding itself eclipsed by domestic rivals who have seized market share with lower coffee prices and leveraged the social trend of "afternoon tea."

But competition for consumers in China isn't the only worry for the US coffee-chain giant. Domestic rivals are also taking the battle to its home turf, with Luckin, China's largest coffee chain, which has twice the number of Chinese mainland outlets as Starbucks, set to open an outlet in New York.

According to Starbucks' official WeChat account, the new price reductions in China will take the price of non-caffeinated drinks like frappuccino, iced shaken tea and tea latte to as low as 23 yuan.

"It is still expensive, although it's rare for Starbucks to cut prices," said a customer surnamed Kang who sat in the Wujiaochang outlet on Tuesday in his favorite seat beside the window.

He has a point. Domestic rivals, including Luckin and Cotti Coffee, have priced some of their drinks in single digits, leaving Starbucks at the top end of the market.

But it isn't just a battle of price lists. Starbucks' charm offensive to attract more customers without putting its global price system under pressure reflects a market where social trends also influence consumer choices.

"I usually come here to meet my friends, and some of them don't drink too much coffee, especially in the afternoon, for fear of sleepless nights," Kang said. "I guess that's why Starbucks rolled out this campaign, to remind people of its non-coffee selections."

Responding to China Biz Buzz inquiry, Starbucks China said, "This is part of our non-coffee strategy. It is not a simple price adjustment, but a focus on the 'afternoon tea' period beyond the morning coffee scenario."

According to an industry report from food-delivery platforms, the time slot between 2pm and 5pm has become a peak period for beverage consumption under the mantra "morning coffee, afternoon tea."

Teahouse chains like Heytea and rising star Chagee have shown just how popular tea drinks can be. Chagee, founded in 2017, began listing in New York in April after the largest initial public offering by a Chinese consumer brand since 2021.

Guojin Securities research points to China's freshly brewed tea beverage market topping 369 billion yuan this year, exceeding freshly ground coffee sales by more than 100 billion yuan.

According to iiMedia Consulting, the scale of China's tea-beverage market will exceed 400 billion yuan by 2028.

"It's wise for Starbucks China to break the perception that 'Starbucks equals coffee' and shape a new brand image as an 'all-day, multi-beverage' brand," said Shi Jun, secretary-general of the coffee committee under Shanghai Food Association.

Meanwhile, the success of Chinese beverage chains expanding into the US market and beyond is yet to be tested.

Luckin now faces not only Starbucks but also rival Cotti in its US expansion. Cotti has opened outlets in California – and in Canada and other countries.

Chinese chains have been successful on the mainland not only because of budget pricing but also because competition has forced them to come up with new flavors, often melding the tastes of coffee with popular teas. Luckin has developed a latte infused with traditional Chinese liquor.