Starbucks will start coffee deliveries in China next month in a partnership with internet giant Alibaba, as the US company looks to protect its lead in a fast-growing coffee market where it is facing tougher competition and a recent decline in sales.
Alibaba’s food delivery platform Ele.me will begin making deliveries from 150 Starbucks outlets in September, expanding to 2,000 stores by the end of the year. Alibaba will also install Starbucks delivery outlets in its chain of Hema grocery stores.
Starbucks controls 80 per cent of China’s coffee shop market, according to consultancy Euromonitor, and generated $3.24billion of its revenues from Asia-Pacific last year — or about 15 per cent of its global total.
In May it unveiled a bold plan to triple Chinese revenue and nearly double the number outlets in the country to 6,000 over the next five years. But the chain left the market stunned just weeks later when it warned same-store sales growth in China would be flat or negative in the third quarter following years of growth.
Chief executive Kevin Johnson blamed the weakness on third-party food delivery services, whose bulk orders had been clogging up its cafés and frustrating patrons who don’t want to wait long for their coffee.
Starbucks shares tumbled after the trading update and briefly hit a 22-month low at the end of June as all three major rating agencies downgraded the company and the chief financial officer said he was stepping down.
Starbucks’ tie-up with Ele.me comes as it looks to catch up with local upstart Luckin Coffee on the delivery front. The chain, which specialises in deliveries to office workers, has been making waves by undercutting its Seattle rival on price and convenience. It has opened 500 outlets this year and raised $200m in a funding round last month that valued it at $1billion.
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