Cold Foam Cold Brew… and throw in a turkey-bacon sandwich. Starbucks’ sales grew 12% to a record $9.2B last quarter (slightly less than Wall Street expected) as java thirst stayed strong and US traffic ticked up. Highlights from the coffee colossus:
Iced everything: Cold drinks dominated, accounting for 75% of US beverage orders. From iced lattes to frozen frappes, consumers are shifting away from hot drinks.
Tasty extras: Customers tacked on fancy add-ons like cold foam to their beverages, and added more breakfast sammies with their coffee orders.
The real star of Starbucks’ earnings wasn’t spinach-feta wraps — it was China. Starbs’ same-store sales in China soared by 46%.
Beijing’s back… China is Starbucks’ second-largest market after the US, with 6.5K stores. Starbs’ China sales plunged during the zero-Covid era, when China’s lockdowns and safety policies kept people from cafés. Things started looking up in May when Starbucks experienced its first China sales growth since 2021. Now it seems that Beijing’s fully back… but not to coffee beans.
Low joe: Starbucks CEO Laxman Narasimhan said that the average person in China drinks only about 12 cups of coffee a year — versus 380 cups in the US.
High tea: He added that Starbs won over China’s historically tea-sipping consumers with “locally relevant innovation.” About that…
Localization is make or break… Coffee king Starbucks made China its second-largest market by molding its menu to cater to cultural preferences (picture: a wider variety of iced and hot tea drinks). Often chains need to localize to win international love (McDonald’s is known for having different menus for different countries). Failure to fit into the cultural context likely accounted for Domino’s closure of all its restaurants in Italy last year.