Starbucks China faces supply chain rumors, employee benefit concerns, and growing tension over its 'third space' policy. Learn about the impact of Boyu Capital's buyout, pricing pressure from rivals, and the changing in-store experience.
Tags:Source: OT-Team(G), 中国商报, 界面新闻
Since its ownership structure changed, Starbucks China has faced a wave of online speculation, with rumors ranging from the cancellation of its “14th-month pay” to outsourcing cups and straws to Mixue and changing coffee bean suppliers.
At the same time, another debate is putting pressure on a long-standing part of the Starbucks experience: its stores as a “third space” where customers can sit, work, meet and relax.
Together, the controversies highlight a broader challenge for Starbucks China under Boyu Capital: how to cut costs and improve efficiency without undermining employee benefits, product quality or the store experience that supports its premium positioning.
Supply Chain Localization Under Scrutiny
On Aug. 11, reports claimed that Zhang Qing, formerly Sam’s Club China’s chief procurement officer, had recently joined Boyu Capital and was involved in planning changes to Starbucks China’s supply chain.
The reports suggested that Starbucks would accelerate localization by bringing in more domestic suppliers, with cups, straws and matcha powder allegedly to be manufactured by Mixue, while some dairy suppliers would also be replaced to reduce costs.
Starbucks China rejected the claims the following day, saying reports that its cups and straws might be manufactured by Mixue or that it was changing coffee bean suppliers were “seriously inaccurate.”
The company said it remains committed to high-quality products and to working with supply-chain partners in an open and mutually beneficial way.
The rumors, however, reflect strong market interest in how Starbucks China’s supply chain may change following the ownership transition.
Starbucks has spent years building a substantial supply-chain network in China, including coffee roasting, warehousing and logistics facilities in Jiangsu, as well as investments in Yunnan’s coffee-growing regions. Its model combines global sourcing with local production.
But competition from domestic chains such as Luckin Coffee has changed the economics of the market. Lower-priced brands benefit from mature domestic supply networks and large-scale procurement of ingredients and packaging, helping them keep prices down.
Industry observers say greater localization does not necessarily mean outsourcing to a direct competitor. More likely, Starbucks could expand its pool of domestic suppliers, optimize its supplier network and invite more Chinese manufacturers to compete for contracts.
The Mixue rumor may have spread so quickly because it tapped into a deeper consumer concern: whether greater localization and cost-cutting could eventually affect Starbucks’ product quality.
“14th-Month Pay” Has Not Been Cancelled
Similar speculation has surrounded Starbucks employees.
Online claims suggested that Starbucks China had begun cutting labor costs by cancelling its “14th-month pay,” changing employment contracts, shifting most employees other than store managers to part-time contracts and removing some paid leave.
Multiple sources familiar with the situation said Starbucks China had not taken such measures.
Starbucks introduced the 14th-month pay in 2021 for nearly 40,000 full-time store employees, from baristas to district managers. The additional month’s salary became a relatively competitive benefit in China’s restaurant and retail sectors.
There has nevertheless been a genuine change to employee incentives.
In November 2025, Starbucks announced a strategic partnership with Boyu Capital under which Boyu would acquire up to 60% of the Chinese joint venture, while Starbucks would retain 40%.
Following the ownership transition, the existing “Bean Stock” equity incentive program was adjusted. Starbucks China has also said that a new long-term incentive plan, including measures related to Bean Stock, would be introduced in the fourth quarter.
Starbucks China CEO Liu Wenjuan said in April that the joint venture would fully inherit existing employees’ labor contracts, with seniority continuing to be recognized, and that existing benefits would remain in place.
The adjustment to equity incentives, combined with the restaurant industry’s growing use of part-time workers, appears to have contributed to fears that broader benefits could be reduced.
Industry insiders point out that a mix of full-time and part-time workers is already standard in the restaurant sector. Part-time staffing can help stores cope with fluctuations in demand, but does not necessarily mean that full-time positions are being eliminated.
For Starbucks, however, any changes to employee incentives are particularly sensitive after years of using benefits to build its reputation as an employer.
A New Test for the Joint Venture Era
The repeated rumors and denials reflect a broader challenge as Starbucks China enters a new phase.
Following the roughly $4 billion transaction, market expectations have shifted from the slower growth traditionally associated with an international premium brand toward greater efficiency and stronger financial returns.
China’s coffee market has also become significantly more competitive. Low-priced coffee chains are expanding rapidly, while tea brands are moving into coffee. Starbucks remains an important player in the mid- to high-end segment, but store expansion, same-store growth and cost pressures have become increasingly difficult.
Labor and supply chains are therefore likely to remain key areas of reform.
The challenge is to balance the interests of investors seeking better returns, employees seeking stable benefits and consumers expecting consistent quality.
Industry observers say information management may be just as important as the reforms themselves. Measures still under discussion or in transition can be reshaped as they circulate online, turning routine adjustments into alarming claims and forcing the company into repeated public clarifications.
But Starbucks China is facing another issue that goes directly to its brand value: how its stores are managed.
“Can Starbucks Do Something About This?”
A growing number of consumers are asking on Chinese social media: “Can Starbucks do something about this?”
Their complaints are not about coffee, but about the “third space” Starbucks has long promoted.
Some customers have complained about people taking off their shoes and putting their feet on chairs, bringing outside drinks or free water into stores, eating strongly scented food, playing music loudly or occupying entire tables for hours without ordering anything.
The result is that customers who have actually purchased coffee sometimes cannot find a seat.
This is not the first time Starbucks China has faced the question of who should be allowed to use its stores.
In May 2024, a debate over “consumption before seating” attracted widespread attention after some customers said they had been reminded to order or politely asked to leave when sitting without making a purchase.
At the time, many people questioned whether Starbucks was putting a price on its supposedly open and welcoming “third space.” Starbucks responded that everyone was welcome.
Two years later, the public mood appears to have shifted.
More consumers are now complaining that Starbucks is not managing its stores firmly enough. For customers who have already bought a drink but cannot find a seat, requiring consumption before seating is increasingly viewed as a way to maintain order.
Starbucks China said it has never imposed a mandatory consumption requirement for seating. Customers encountering problems can notify employees, who can communicate with people who have not made purchases. The company said it continues to welcome everyone and wants to provide a comfortable environment.
Several employees said there is no strict internal rule requiring customers to make a purchase before taking a seat. Stores generally try to guide customers toward purchasing and handle disruptive behavior through polite intervention.
The “Third Space” Is Part of Starbucks’ Value Proposition
The shift in consumer sentiment reflects a deeper business challenge.
As coffee prices continue to fall and brands such as Luckin compete aggressively on price, Starbucks’ ability to maintain a higher average ticket depends on more than the drink itself.
For many customers, part of what they are paying for is the physical environment — a relatively comfortable place to work, meet or relax.
But when people occupy seats for long periods without purchasing anything while paying customers cannot find a place to sit, that experience comes under pressure.
Starbucks therefore faces a difficult choice.
Strictly enforcing a purchase-before-seating policy could conflict with its welcoming and inclusive “third space” image and potentially trigger another backlash. Maintaining a relaxed approach, however, could further weaken the in-store experience.
The issue is becoming more important as Starbucks tries to defend its pricing power.
In the second quarter, Starbucks China reported revenue of $799.8 million, up 8% year on year. Same-store sales rose 0.5%, with transaction volume up 2.1% but average ticket size down 1.6%.
In other words, more customers were making purchases, but they were spending less per transaction.
The same pattern appeared in fiscal 2025’s fourth quarter, when same-store transactions in China rose 9% while average ticket size fell 7%.
As lower-priced coffee continues to attract consumers, Starbucks faces a basic question: what will justify an average ticket above the market average?
The answer is unlikely to be coffee alone.
North America Has Already Taken a Different Approach
Starbucks has already taken a clearer position in North America.
Last year, the company reversed its “open-door” policy introduced in 2018. In the US and Canada, people who do not make purchases can no longer remain in stores for extended periods or use facilities such as restrooms.
The policy, which took effect in January 2025, was presented as a way to improve the store experience and prioritize paying customers.
So far, it has not been extended to China.
Meanwhile, Starbucks China continues to experiment with its store formats.
This year, the company launched its “1,000 Stores, 1,000 Faces” initiative, using different products, services and store formats as part of its push toward a 20,000-store target.
The formats range from small stores and coffee carts to outlets in office buildings, hospitals and schools, as well as themed stores.
As the network becomes more diverse, the traditional Starbucks store is no longer the only model. This raises a new question: if smaller, grab-and-go formats continue to grow, which stores should still function as full-fledged “third spaces”?
With Boyu Capital’s acquisition of a 60% stake now completed, Starbucks China is entering a period of deeper localization and operational reform.
Its challenge is not simply to cut costs or sell more coffee, but to find a balance between profitability, employee interests, product quality and the customer experience that has long defined the brand.
For Starbucks China, the next question may be what customers are really paying for when they walk through the door.
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