Starbucks is creating an entirely new position to fix its China problem. For years, the U.S. coffee chain enjoyed success as Chinese consumers, optimistic about China’s economic prospects, flocked to Western brands. But changing tastes and tighter budgets are now pushing China’s coffee drinkers to cheaper local alternatives.
Last week, Chinese media outlet Late Post reported that Starbucks China has hired Tony Yang as its first-ever chief growth officer; Starbucks China confirmed Yang’s appointment to the position to Bloomberg on Monday.
Starbucks did not immediately respond to Fortune’s request for comment.
Yang joins the U.S. coffee company after a stint as the head of user development at Jiyue Auto, an EV joint venture between car manufacturer Geely and internet company Baidu. (Jiyue is currently struggling, reportedly cutting jobs and scaling back operations in a bid to stay afloat in China’s tough car market.)
He will try to build new partnerships with entertainment brands and figures from pop culture to revive sales, according to Bloomberg.
Starbucks’ China challenge
Starbucks’ new chief growth officer will have his work cut out for him. The U.S. coffee company’s China revenue is falling as local chains win over Chinese coffee drinkers.
The company’s China revenue for the quarter ended Sep. 29 came in at $784 million, a 7% decline year on year. Comparable store sales dropped 14% over the same period.
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Starbucks faces fierce competition from newer coffee chains with larger footprints and more affordable drinks.
Luckin Coffee generated $1.45 billion in revenue for the three months ended in September, almost double Starbucks China revenue for the same period. (Luckin’s revenue includes its Singapore operations.) The coffee chain, infamous for being delisted from the Nasdaq exchange in 2021 after an accounting scandal, has continued to expand and now has more outlets in China than its U.S.-based competitor.
Starbucks is also wary of worsening ties between the U.S. and China. In its annual report released in November, the company pointed to the tense relationship between Washington and Beijing, as well as possible anti-U.S. sentiment among Chinese consumers, as risk factors.
Chinese consumers are also getting more cautious with their spending amid an uncertain economy. The prospect of a renewed trade war with incoming U.S. President Donald Trump could also be weighing on economic sentiment.
Chinese retail sales rose 3% year on year in November, slower than economist forecasts. Discretionary spending in particular took a hit: Beverage spending fell 4.3%.
