Despite the challenge of the epidemic, Starbucks, the world’s largest coffee chain, is not planning to slow down its expansion in China.
On October 29, US local time, Starbucks announced the fourth quarter results of fiscal year 2020 as of September 27. Snack reps noted that the revenue of Starbucks in China has resumed growth, and the same store sales have also maintained an upward trend. What’s more, in the fourth quarter, Starbucks China set a new record for the total number of stores opened in the quarter.
Xiaoshidai learned that at the following performance meeting, Starbucks CEO Kevin Johnson, Starbucks CFO pat grismer and Starbucks international and channel development group president John Culver further disclosed Starbucks’ performance in China in the current quarter, the driving force behind it, and future development plans in China.
Kevin Johnson, CEO of Starbucks (photo)
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Revenue growth in China 7%
“2020 is an extraordinary year, and everyone around the world is dealing with the epidemic and all the effects that come with it. This shared experience prompts us to have a lot of reflection, learn from it and get inspiration. ” At the beginning of the meeting, Johnson used three words to describe Starbucks’s current situation: “confidence, resilience and optimism.”
First of all, in the face of the changing situation, Starbucks has always been in action, he said. “Our recovery is going very well, as evidenced by better than expected sales and profits in the fourth quarter, which gives us confidence.” “Second, we have accelerated several growth strategies and built new business resilience for the future through rapid innovation to adapt to new consumer behaviors and preferences,” he said
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Third, he said that Starbucks’ staff’s “extremely optimistic” view of the company’s fiscal year 2021 was “extremely optimistic” because of its staff’s willingness to cope with difficulties and adapt to circumstances, as well as its innovative agenda of launching new drinks, enhancing customer experience and expanding digital customer relationships. “In this unprecedented situation, Starbucks is more focused than ever on making the investments necessary to make our brand and company a long-term success.” He said.
Johnson said he was satisfied with the performance of fiscal year 2020, “the two major growth markets, the United States and China, recovered faster than expected.”. In the fourth quarter, Starbucks’ global revenue was $6.203 billion, down 8.1% year-on-year, and its same store sales in the United States, its largest market, fell 9%.
Starbucks China’s fourth quarter performance data of fiscal year 2020
Let’s focus on the performance of the Chinese market.
In the fourth quarter, in China, the world’s second largest market, Starbucks’ revenue was $8145 million (about 5.444 billion yuan), up 7% year-on-year. The same store sales momentum continued to improve, falling 3% year-on-year.
“On the basis of the positive momentum in the third quarter, China’s same store sales continued to improve every month in the fourth quarter, which was – 3%. This is in line with our expectations, mainly due to the excellent customer experience and product innovation, especially our new tea cloud series product platform and expanding digital platform. ” Johnson said.
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Subsequently, grismer added that same store sales in China increased by 1% in September, including a four percentage point VAT credit, which means a slight improvement over August’s same store sales. In the fourth quarter, China’s same store sales fell 3% year-on-year, including a 4% VAT concession.
Record opening speed
But what is more remarkable is the speed of Starbucks in China in the post epidemic period.
In the fourth quarter, Starbucks added 480 stores globally, including 259 stores in China, setting a new record for the total number of Starbucks stores in China. By the end of September, the total number of Starbucks stores in China had reached 4706.
“In my opinion, the most remarkable recovery in China business is the accelerated expansion of new stores, which is the first driving force for our growth in China.” Johnson said at the meeting that despite the challenges posed by the epidemic, Starbucks China broke through the milestones of 4600 and 4700 stores in a row in the fourth quarter.
According to him, Starbucks opened nearly 260 stores in China in the fourth quarter alone. In the past 12 months, 581 stores have been added, up 14% year-on-year. “It’s a great team achievement considering that we’ve been in China for a few months since late January,” he said He said.
Johnson said Starbucks’ disciplined store expansion in China was paying off, with the new stores “opening well” and early returns were basically in line with pre epidemic levels.
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In July last year, Starbucks opened its world’s first “coffee express” store in Beijing, offering online ordering, pick-up and take out. Johnson revealed today that as part of its development plan for its stores in Huamen, Starbucks China has opened 40 new coffee shops in nine cities in fiscal year 2020. The early results are “encouraging” and the Chinese team is accelerating the opening of more coffee shutter stores.
That may be accelerating.
In response to analysts’ questions, Culver said it expected Starbucks to have a net increase of 600 stores in China in fiscal year 2021, “but we will continue to look for new opportunities to speed up the pace where feasible.”
“We are fully committed to accelerating growth and targeting opportunities. We believe in the goals we set, and if we can get more from it, we will go further. For example, we have been discussing with the owners, and they are also seeking cooperation with us to open stores at the relevant address. ” Culver said.
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He said it was “a big deal” for Starbucks China to continue its efforts to expand its stores, which accounted for about 75% to 80% of Starbucks’ total revenue growth in China.
Starbucks has previously proposed to achieve 6000 stores in China by the end of fiscal year 2022. “We have always been optimistic about achieving this goal, so this means that after fiscal 2021, we will see the pace of opening new stores in China accelerate.” Grismer said at the meeting today.
In addition to speeding up the opening of stores, digitalization is another major focus of Starbucks China.
According to Johnson, in the past 12 months, the share of Starbucks China Mobile’s order sales has more than doubled, reaching 26% in the fourth quarter, with 13% from outbound delivery and 13% from mobile phone orders and payments, higher than the level before the epidemic.
“In fiscal year 2020, we launched digital innovations in China, including launching new wechat apps, upgrading star club membership program, etc., and our digital partnership with Alibaba, which enhanced customer interaction and promoted the strong growth of active members of Starbucks.” He said.
According to him, in the fourth quarter, Starbucks China’s 90 day active membership increased by 36% from the third quarter to 13.5 million, up 34% from the same period last year.
“We are actively expanding, for example, we have now entered all the platforms of Alibaba (such as Tmall, Taobao, Alipay, etc.). At the same time, we have also launched outbound services on WeChat platform, and recently launched the service of distributing Star gift cards.” Grismer added. Up to now, 98% of Starbucks’ stores in China provide “coffee express” service, and 84% of its stores provide delivery service.
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Another crucial trend that Starbucks sees is the growing pursuit of healthy eating. In April this year, Starbucks China joined hands with beyond meat and oatly to launch “plant meat” and oat milk drinks.
At the meeting today, grismer specifically mentioned that oat milk products “have been a great success.”. “You’ll see customers craving a healthy diet, so the team is working hard to develop the business.” He said.
“Full recovery” before the end of the year
Looking forward to fiscal year 2021, grismer said at the meeting that global same store sales are expected to grow by 18% to 23% without a new round of persistent outbreak and / or global economic disruption. Among them, the same store sales in the United States are expected to grow by 17% to 22%, and those in China are expected to increase by 27% to 32%.
Grismer reiterated that it expects Starbucks China’s same store sales to fully recover by the end of the first quarter of fiscal year 2021. “This does not include the temporary VAT exemption, which we expect to expire in January.” He said.
In terms of store expansion, grismer said that Starbucks is expected to have a net increase of about 1100 Starbucks stores worldwide in fiscal year 2021. For the international market, the company expects to open about 1300 new stores and close about 250 stores in fy2021, which means a net increase of 1050 stores, including a net increase of about 600 stores in China.
This means that in the next fiscal year, nearly 60% of Starbucks’ global net additional stores will come from China.
In addition, Starbucks expects revenue of $28 billion to $29 billion in fiscal year 2021, with earnings per share of $0.32-0.37 in the first quarter of fiscal year 2021, and between $2.34 and $2.54 for the full year.
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