Chinese chains Luckin Coffee and Mixue are coming for U.S. customers, because U.S. companies taught them how

Starbucks pursued aggressive growth in China, opening a new café every nine hours and aiming to build a modern community for a growing middle class. China became a major market, with plans to surpass the U.S. by 2025. Market conditions shifted as consumers proved reluctant to pay premium Starbucks prices when local competitors offered cheaper drinks, mobile ordering, quick delivery, and viral menu stunts. Starbucks maintained a high-end coffeehouse image and used a pickup-only approach in the U.S. after the pandemic, while China operations continued. Starbucks’s share of China’s coffee market fell from 42% in 2017 to 14% by 2024 despite store growth. Starbucks sold its China business to Boyu Capital for $4 billion, and other Western chains like Tim Hortons also faced declining sales and losses.

"Starbucks was opening a new café every nine hours in the country, a pace so aggressive, it left some analysts puzzled. Experts I interviewed saw a company working hard to appease the Communist Party. Founder Howard Schultz thought China represented the future: a vast middle class hungry for the "affordable luxury" of Starbucks coffee and his version of modern community, even though coffee was still a largely unfamiliar drink there."

"Consumers proved reluctant to pay Starbucks prices when the homegrown rivals that popped up offered cheap drinks, hassle-free mobile orders, quick delivery, and endless viral menu stunts. Starbucks pursued a pickup-only format in the U.S. after the pandemic (an ill-fated move that the company is just now rectifying), but was committed to maintaining the brand's high-end coffeehouse image in China."

"The company's share of China's coffee market fell from a high of 42% in 2017 to 14% by 2024, even as its store count doubled. A latte that cost $4.25 at Starbucks went for $2.25 at Luckin and $1.75 at Cotti."

"In April of this year, under new CEO Brian Niccol's leadership, Starbucks finally cut its losses and sold the China operation to Boyu Capital, a private-equity firm cofounded by the grandson of former Chinese president Jiang Zemin. Boyu got a favorable deal: It paid $4 billion to operate roughly 20% of Starbucks's 40,000 global stores."

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