Coffee Giant Starbucks Struggling Amidst Global Slowdown in Coffee Sales

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Starbucks, the largest coffee chain in the world, said on Thursday that it expected a dip in global cafe sales growth to continue into the first quarter of 2018. For whatever reason, Starbucks failed to attract U.S. consumers with its lineup of holiday drinks. Normally, Americans can’t resist their pumpkin spice lattes over the holidays, but this year they managed to stay away.

Shares for Starbucks fell by over four percent to a low of around $57 per share. Company executives sought to soften the blow for investors by assuring everyone that the slowdown was unrelated to internal mismanagement. Specifically, executives assured investors that tumbling share prices were unrelated to Starbucks’ method of cornering the market.

There were fears that Starbucks locations would cannibalize one another, but executives say that that isn’t happening. Executives were also quick to tamp down rumors that increased competition from bargain coffee chains or boutique, expensive chains was responsible for the recent dip in sales.

Instead, Starbucks executives argued that holiday promotional offers and holiday merchandise somehow did not resonate with customers in the way that they’d planned for it to. Starbucks Gingerbread latte and Chestnut Praline latte were supposed to be big hits in the fourth quarter of 2017 and culminate with a spike in Starbucks share prices, but that strategy failed to materialized as planned.

Starbucks executives also chalked up the lackluster performance to more imponderable factors, such as the mysterious slowdown in sales during the afternoon and evening hours of the day. A consumer shift to online shopping was also blamed for some of the slowdown, but it’s unclear how that would have impacted consumers’ tendencies to purchase coffee on their way to work unless those consumers were economizing and choosing to brew their own coffee at home.

In any event, Starbucks is now managing expectations among its potential investors by saying that same-store sales growth should only approach the low limit of its three-to-five percent projected growth rate. Still, the U.S. corporate tax cut ushered in by the Trump administration could well soften the blow of slow growth for Starbucks.

Surprisingly, sales in China could also help pick up some of the slack as Starbucks plans to open more than 3,000 locations there over the next ten years. Net income at Starbucks has already risen past $2 billion in the fourth quarter of 2018 thanks to 1,300 store openings in China.

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