by SHEN Xiaoge

Starbucks China is expanding its non-coffee portfolio and cutting prices as it looks to capture a bigger share of the afternoon tea market.

From June 10, the coffee chain will roll out lower prices across three non-coffee categories — Frappuccino, Iced Shaken Tea, and Tea Latte — with dozens of drinks set to be discounted. For a grande-sized drink, prices will drop by an average of 5 yuan, with some starting at 23 yuan.

Yang Zhen, chief growth officer at Starbucks China, said the move is part of a strategy to build a fuller non-coffee lineup alongside its core coffee offerings, allowing the brand to tailor its menu to different consumption patterns and store formats.

China's coffee market remains sizable but is nearing saturation. The number of coffee shops nationwide climbed past 200,000 in 2024, with 70,000 new openings and 53,000 closures, leaving a net gain of just 17,000 stores. As coffee penetration plateaus, competition has intensified.

Meanwhile, the tea beverage market has been growing rapidly, with new brands emerging and taking share. Starbucks' push into non-coffee products is aimed at broadening its appeal and tapping further demand from its existing customer base.

Frappuccino, Iced Shaken Tea, and Tea Latte have shown strong momentum. The Frappuccino remains a perennial summer favorite while sales of Iced Shaken Tea have posted three straight years of double-digit growth.

Rival Luckin Coffee has also moved to diversify, with its light milk tea series selling more than 44 million cups in its first month.

Afternoon tea hours have become an increasingly competitive battleground for consumer brands. Starbucks has kept up a steady stream of product launches and price adjustments to target the segment, including a recent collaboration with Disney's Zootopia franchise on three new Iced Shaken Teas.

With a membership base nearing 140 million, Starbucks China sees potential to drive afternoon traffic further.

Still, broader challenges persist. Starbucks China reported net revenue of US$2.958 billion for the 2024 fiscal year, with fourth-quarter revenue up 6 per cent quarter-on-quarter at US$783.7 million. However, same-store sales dropped 14 per cent, while the average ticket size slipped 8 per cent and transaction volume fell 6 per cent. In the first quarter of fiscal 2025, revenue rose 1 per cent year-on-year to US$744 million, but same-store sales continued to decline, down 6 per cent.