Starbucks Partners with Meituan to Strengthen Presence in Crucial China Market

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BEIJING, Jan 18 (Reuters) – Starbucks (SBUX.O), which has seen sales slow in China due to the fallout from COVID-19, is trying to expand its reach into its second largest global market by distributing its coffees through the intermediary of the main distributors in the country. food delivery company, Meituan.

The American coffee chain announced on Tuesday that it has entered into a partnership with Meituan (3690.HK) that will allow its Chinese customers to order coffee delivery and make reservations at its stores through the super app’s platforms.

The move comes as competition in China’s coffee market intensifies and aims to expand availability from Starbucks, which first launched food delivery services in the country in 2018 through an exclusive partnership with the Ele.me branch of the Alibaba Group (9988.HK). , Meituan’s main rival.

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“Exclusive cooperations have a duration,” said Liu Xingliang, president of technology consultancy China Internet Data Center. “Starbucks is going to expand its service with more partners, I don’t think it’s a surprise.”

Alibaba, whose partnership with Starbucks will continue, did not immediately respond to a request for comment.

Shares of Meituan, whose main app also offers services such as restaurant and hotel reservations, rose 5.3% in morning trading before paring gains.

Starbucks’ China business has been hit by a resurgence of the coronavirus in the country that forced it to close stores in several major cities and led it to report a 7% drop in comparable sales in China in the fourth quarter. . Read more

It also faces growing competition from other coffee chains such as Italian Lavazza, backed by restaurant chain Yum China (9987.HK), and Canada’s Tim Hortons, which have expanded into China.

China market research group director Ben Cavender said given concerns about COVID-19 and in-store traffic, it made sense for Starbucks to be aggressive in promoting delivery.

“Part of that means being available on the two major aggregators,” he said, referring to Meituan and Ele.me. “Starbucks now has enough competition from other coffee players that if a consumer doesn’t see their stores available in a chosen app, they will simply switch to another brand.”

The China expansion comes amid a security cloud for Starbucks. The US company carried out food safety inspections and trained staff at its more than 5,000 stores in China in December after a newspaper reported that two of its outlets in Wuxi had used expired ingredients in their drinks, prompting several local governments to launch checks on its stores. Read more

Meituan had around 668 million paying users in China at the end of September and held around 68.2% of the Chinese food delivery market in the second quarter of 2020, according to the latest available figures from Trustdata.

Starbucks has 5,360 stores in more than 200 Chinese cities, according to the company’s latest earnings report.

Starbucks also said the two companies will launch a service that will allow Meituan users to make private reservations to sample and learn how to make coffees at Starbucks stores. The so-called Salon 1971 service is exclusive to Meituan’s platform, he added.

It also plans to use Meituan’s “super store” feature as part of the partnership which will see each of its stores have its own unique page on Meituan’s platforms by the end of this year, from which customers can book food delivery services or check out local events.

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Reporting by Sophie Yu and Brenda Goh; Editing by Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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