What happened: In response to competition from China rival Luckin, Starbucks CEO Kevin Johnson said in a recent interview with Bloomberg that the company is well-positioned for long-term growth in China, the second-largest and the fastest-growing market for the coffee chain. Over the company’s 48-year history, Starbucks has always had lots of competitors and China is no exception, Johnson said. “We really understand what makes a differentiated experience” especially after 20 years of operation in the country, he added. The combination of premium spaces, quality coffee, personalized service, and extensive digital reach through a partnership with Alibaba are the differentiators for Starbucks in China, Jones explained.
Why it’s important: By giving out generous discounts and building expansive store networks across the country, Chinese coffee chain up-and-comer Luckin is aggressively challenging Starbucks in China, a country of increasing strategic importance. However, Luckin’s capital-scorching growth has also drawn concern about its sustainability, given the company’s huge losses. China is increasingly a coffee-drinking nation. The country’s total coffee consumption grew at an average annual rate of 16% in the last decade, significantly outpacing the world average of 2%, according to figures from the International Coffee Organization.