Starbucks could get dragged into discounting in the U.S.

TODAY’S STORY

Starbucks is scaling back discounts and promotions in the U.S. as part of a strategy to position itself as a premium brand. The coffee chain also pledged not to raise prices at U.S. locations through the fiscal year 2025.

So, price baselines have essentially been set in the U.S., but new Starbucks CEO Brian Niccol hasn’t decided what to do in China yet. Because of China's slowing economy, price is an even more important consideration for Chinese consumers. Starbucks’ same-store sales in the country plummeted 14% in the fourth quarter, as popular Chinese coffee brands consistently undercut them on price.

For example, in Beijing, a small latte that costs $4.22 at Starbucks goes for $2.25 at Luckin, $1.75 at Cotti, and $2.11 at Manner. These Chinese coffee brands also offer discounts and promotions, which can further lower the price. Luckin recently offered a promotion selling most of its drinks at less than $1.50.

The market's unique challenges have dragged Starbucks into the discounting and promotions game over there, and those issues might soon rear themselves in the U.S. — Luckin is preparing to take on Starbucks in the U.S.

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