Chongqing - Starbucks China is cutting prices for the first time on key product lines. Starting June 10, Frappuccinos, Iced Shaken Teas, and Tea Lattes will see an average price drop of 5 yuan (about $0.70), with some drinks as low as 23 yuan—a major move announced on June 9 to reshape its non-coffee offerings.

This price cut comes amid the intense competition in China's rapidly expanding beverage market, particularly between coffee and tea. According to China Insights Consultancy, the freshly ground coffee market in China reached 172.1 billion yuan in 2023, while the freshly brewed tea market totaled 258.5 billion yuan. The competition is no longer solely about market share, but also about meeting changing consumer demands, consumption scenarios, and brand differentiation.

Before the price adjustment on June 9, the large-sized Iced Shaken Peach Oolong Tea was priced at 37 yuan. (Photo/Zheng Ran)

After the price adjustment, the large-sized Iced Shaken Peach Oolong Tea is now priced at 32 yuan on Starbucks' WeChat Mini Program. (Graphic/Zheng Ran)

Coffee and tea serve different consumer needs. Coffee primarily meets functional demands, particularly for boosting alertness and providing energy. According to CBNData, the primary motivation for coffee consumption is the functional benefits, such as relaxation and mental refreshment. Tea, on the other hand, is driven by the desire for sweetness, social interaction, and flavor exploration, with its consumption being more leisure-focused. Tea consumption typically occurs in social settings, whereas coffee is more commonly consumed in work environments.

At Shin Kong Place Chongqing, Starbucks and the Chinese tea brand Chayan Yuese are side by side. (Photo/Zheng Ran)

Starbucks, which entered China in 1999, helped elevate coffee consumption by turning it into a comprehensive experience. However, the company’s premium pricing and focus on business and social spaces slowed the broader adoption of coffee. The rise of Luckin Coffee in 2017, with its affordable and convenient "small store pick-up" model, rapidly expanded the coffee market in China. In contrast, the tea market has been more mature, with new-style tea drinks from brands like HeyTea and Naixue gradually replacing traditional milk tea.

Starbucks' decision to reduce prices on non-coffee drinks reflects its response to increasing competition. Previously priced around 30 yuan, Starbucks' non-coffee drinks are now priced between 20 and 25 yuan, aligning with the price range of popular new tea brands. 

Former COO Liu Wenjuan noted in 2022 that iced tea and Frappuccinos were especially popular in lower-tier markets, where their affordability attracted strong consumer interest, particularly in the afternoon and evening. By offering more budget-friendly options, Starbucks hopes to boost foot traffic during these off-peak hours, providing a "morning coffee, afternoon non-coffee" experience.

Industry experts believe that this price reduction will have a positive short-term impact, stimulating consumer demand, particularly during the summer beverage season. In the long term, this price strategy is part of Starbucks' broader plan to capture more market share in China’s lower-tier markets. With 7,758 stores in China by the end of fiscal Q2 2025, Starbucks is positioning itself to tap into these emerging markets by offering more affordable, localized products.