Starbucks (NASDAQ: SBUX) is currently navigating a series of significant challenges. On the first day of autumn, e-commerce platforms like Taobao Flash Sale and Meituan pushed the transaction prices of some Starbucks beverages down to 12.9 yuan, 6 yuan, or even 4 yuan. It was the first time the brand, which traditionally sells coffee for over 30 yuan a cup, was described as having been "priced down to Luckin Coffee Inc. (OTC: LKNCY) levels." Although the low prices came primarily from platform subsidies rather than an official menu price cut, Starbucks' price halo was clearly cracked.
Days later, a Starbucks store in Changzhou, Jiangsu, made headlines for "turning off the air conditioning." Media reports indicated that the store closed its AC because some older adults were occupying seats for long periods without making a purchase. While some sympathized with the staff's predicament, others questioned if Starbucks was abandoning its long-promoted "third place" concept. Starbucks China responded that it has never forced customers to make a purchase to sit down. A dispute at a single store evolved into a public examination of the company's brand philosophy.
An even more dramatic report linked Starbucks to its far cheaper rival, Mixue Ice Cream & Tea. On August 11, a report claimed Starbucks China was planning a supply chain overhaul, including outsourcing the production of paper cups, straws, and matcha powder to Mixue, entrusting some bakery items to Yum China, and increasing the use of domestically sourced coffee beans. The goal was reportedly to cut supply chain costs by 30% to 40%. Around the same time, rumors circulated online that Starbucks China had cancelled its 14th-month salary, changed employee contracts, reduced paid leave, and converted many store staff to part-time. These claims were quickly denied. Starbucks China stated that the reports about "Mixue acting as an OEM" and "changing coffee bean suppliers" were "seriously inaccurate." A source close to Mixue said they had not received any orders related to Starbucks. Subsequent media checks also found no evidence to support the claims of cancelled 14th-month pay or contract changes. The confirmed change was an adjustment to the existing "Bean Stock" plan, with Starbucks stating other benefits would remain unchanged for now.
Why the "Mixue-ification" narrative resonates with Starbucks' anxiety
The real reason the rumors seemed plausible is the ongoing operational changes at Starbucks China. In April 2026, Starbucks completed a joint venture with Boyu Capital. Boyu holds a 60% stake in Starbucks China's retail business, while Starbucks retains 40% and continues to own the brand and intellectual property. Boyu, a private equity firm focused on the Chinese consumer market, has invested in companies like Mixue Ice Cream & Tea and Beijing SKP. This explains why Starbucks chose Boyu. Previously, Starbucks China relied on strict brand standards and a direct-store system from its US headquarters. Now, it faces fast-moving local competitors like Luckin Coffee Inc. and Cotti Coffee, which excel at digital marketing, rapid store expansion, and cost control. Starbucks needs a partner familiar with the Chinese market to make faster decisions and enter more cities. The investment relationship between Boyu and Mixue didn't prove Mixue would be an OEM, but it created a powerful, intuitive link: would an investment firm that knows Mixue's supply chain efficiency bring that same approach to Starbucks? The long-term goal of expanding Starbucks China's stores from about 8,000 to 20,000 further fueled this perception. Reaching 20,000 stores means Starbucks can't rely on large stores in top-tier city centers; it must enter more county-level cities, communities, and new consumption areas, requiring faster decisions, more flexible operations, and lower costs.
Meanwhile, Starbucks' price boundaries are softening. In 2025, it lowered prices on some non-coffee beverages. During the recent Start of Autumn, users could buy promotional Starbucks drinks on Taobao Flash Sale at well under 50% off through a combination of store discounts and platform coupons. Meituan even offered a "first cup of autumn" Starbucks voucher for 12.9 yuan, the same price as some Luckin Coffee Inc. vouchers. While these low prices are primarily from subsidies, they change consumer perception: a brand that rarely participated in price wars is now appearing in multi-yuan orders. The changes in ownership, expansion pace, and pricing have made localization and cost reduction the key themes for understanding Starbucks. These real changes, when combined, created the plausible but false stories about Mixue OEM work and cancelled 14th-month pay. "Mixue-ification" is therefore not just a supply chain rumor, but a symbol of the market's expectation that Starbucks must change, even if no one is sure what it will become.
Starbucks has become a passive choice
Using the "Starbucks vs. Luckin" framework to describe the Chinese coffee market is now outdated. Luckin Coffee Inc. changed coffee's price and convenience. Today, Starbucks faces a more complex market: affordable chains like Luckin Coffee Inc. and Cotti Coffee compete for daily orders; premium brands like M Stand and Grid Coffee offer novelty; independent cafes provide local flavor and personality; and tea chains like Heytea and Nayuki compete for social occasions with more choices at lower prices than Starbucks. None of these brands have fully replaced Starbucks, but they have each taken away a reason for consumers to choose it. For example, the 2026 Guangzhou Coffee Culture Season featured over 230 brands from 13 countries and 43 cities. By 2025, Guangzhou had 8,017 coffee shops, ranking second in the country. In areas like Dongshankou, Yongqingfang, and Jiangnanxi, specialty coffee shops are creating unique drinks with local ingredients like tangerine peel, lychee, and Cantonese cuisine elements. A consumer could visit a new cafe every day for 22 years. In a city with nearly 10,000 coffee shops, Starbucks' biggest advantage—standardization—can ironically feel like a lack of surprise. Chinese consumers haven't moved to a single brand, but have dispersed across many. They order Luckin Coffee Inc. for a workday pick-me-up, visit an independent cafe on weekends, explore beans at a coffee festival, and meet friends at Heytea or Nayuki. Starbucks becomes a fallback option in airports, malls, or unfamiliar cities when certainty is needed. It remains reliable but is no longer the natural first choice. The competition from new-style tea drinks is particularly easy to overlook. When meeting friends, people don't just look for a coffee shop; they look for a comfortable, convenient place where everyone can order something suitable. In a group where one person wants coffee, another wants fruit tea, and a third wants to avoid caffeine, the decision is often made by the person with the fewest options. This means the "third place" hasn't disappeared, but Starbucks has lost its monopoly on it. In first-tier cities, Starbucks is in an awkward position: it's not as cheap or dense as budget coffee, and not as professional or unique as specialty coffee. Its space still has value, but it faces competition from tea chains and independent cafes. Expanding into lower-tier markets is not a simple replication of past success. When Starbucks first entered Chinese first-tier cities, the market was still forming. It didn't just sell coffee; it helped cultivate the habit of drinking fresh-brewed coffee and working in cafes. Now, entering county-level cities, it faces a market already shaped by Luckin Coffee Inc., Cotti, Lucky Cup, and tea chains, which have established a coffee culture based on lower prices, mobile ordering, and quick pick-up. Starbucks still has brand appeal, with new store openings generating queues and social media buzz. But a one-time opening queue is a different business from weekly repeat purchases. Maintaining its existing price and store model might lead to low purchase frequency, while changing its model to be more like local chains risks losing its unique appeal. This is the core of Starbucks' passivity. Its greatest success was defining what a modern coffee shop should look like in China. Now, the market has provided many new answers.
Will reaching 20,000 stores still be Starbucks?
Starbucks' plan to expand from about 8,000 to 20,000 stores in China means it must open the equivalent of about 1.5 times its current size. These new stores can't mainly rely on large locations in core malls in first- and second-tier cities; they must enter more counties, communities, and office buildings. The original large-store format must change. In April 2026, Starbucks China proposed a "Thousand Stores, Thousand Faces" strategy. It currently has stores in over 1,000 county-level administrative districts and plans to add at least 1,500 more in the next three years. Store formats will become more flexible, ranging from large Reserve stores to 10-square-meter micro-stores, convenient office-building outlets, and concert coffee trucks. Changing the store format is not the hard part. The challenge is not just shrinking a big Starbucks. Without the sofas, music, and lingering experience, consumers will make a more direct comparison: why is this latte more expensive? Consumers in first-tier cities have more coffee experience and expect more professional products and continuous innovation. Consumers in county-level cities may prioritize price, convenience, and a social space. Even within the same city, an office-building store needs to serve drinks quickly, a community store needs to encourage staying, and a coffee truck at a scenic spot or concert needs to meet immediate demand. These different stores share the same logo but can no longer offer the same value proposition. This is the real problem the "Thousand Stores, Thousand Faces" strategy aims to solve. Starbucks once built trust through standardization: the coffee, service, and environment were largely the same in every store. Now, it needs to allow specific cities and stores to have more flexibility to offer products, spaces, and services that better meet local demand. But differentiation has a downside. For a chain, allowing thousands of stores to be different without them becoming a collection of unrelated shops is a difficult balancing act. Going from 8,000 to 20,000 stores, Starbucks' real change lies in how it understands the Chinese market. China is no longer a market waiting for an international brand to provide a standard answer. Different cities have developed their own coffee tastes, habits, and cultural spaces. Starbucks needs to enter these differences, not just overlay a single template. More than 20 years ago, Starbucks brought a standardized coffee shop to China and showed people what a cafe could be. Now that Chinese consumers have provided many of their own answers, it's Starbucks' turn to relearn: what should a coffee shop look like in Shanghai, Guangzhou, Shenzhen, Chengdu, and a county-level city?
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