Why Foreign Brands Are FAILING In China NOW

is this the end of foreign brands in China can Starbucks and KFC fight their way back into dominance in the Chinese market we got to talk about it so please hit that like button check out other episodes of the hot poot boys essentially I feel like I'm doing like a business school case assignment right here so anyways guys let's roll the clip first quarter Revenue reached 6.28 billion yen meanwhile Starbucks has been struggling in China the Seattle based giants has more than 7,000 stores on the mainland and opened more than 800 outlets in the first quarter of 2024 their China Revenue was $735 Million us over that same quarter $35 million us less than luckin if you think price is the only Advantage luckin has think Chinese entrepreneurs are also creating their own fast food chains like this one this isn't simply a knockoff of KFC and McDonald's is center around Chinese elements but as with other domestic brand in China these days price is certainly a future so I mean that's basically it guys uh particularly Starbucks and we're going to be focusing on Starbucks because that's what the video is mostly about you know which is globally the biggest coffee brand but not doing so well in China anymore because of China's domestic Brands and also I'm going to you know give my own reasons why I think this is happening because you know maybe there's a lot going on in the Chinese psyche and whatever but anyways guys please hit that like button check out other episodes of the hot pop boys because I like talking about this because like you know I'm always curious about these Chinese Brands now you know we're going to get into the fact on whether you think like oh the Chinese Brands copied the American brands or took after or their remakes or heavy inspiration I mean listen uh there's definitely some of that going on but it's not like the West hasn't been inspired by the East either but anyways uh I want to talk about these seven reasons why chains like Starbucks but maybe particularly Starbucks is struggling in China you know and this is I did I did a lot of research and you know I put my little NBA hat on I'm not an NBA student but I went to business school anyways let's get into it uh Point number one increase competition from domestic Brands guys the name luck and coffee I just saw they're opening up now in Malaysia okay so they're expanding across Asia but they have over 20,000 stores across China this is a cheap more efficient and newer and domestically owned native Chinese brand of coffee that is eating up a lot of Starbucks share also another one is kotti coffee which I actually had there's actually a kotti coffee in San Gabriel California so in the Chinese zone I'm just going to go ahead and say the Chinese zone is going to have some of these Chinese Brands opening up because people are familiar with it and a lot of people from the 626 may be familiar with it or more open to it because they go back back and forth or whatever um also also not to say this but it's not just those two Brands mcafe which is McDonald's cafe section which is actually a lot bigger in Asia than it is in America and also K Cafe which is essentially KFC's M Cafe side and you're going to notice and it's it's no surprise but KFC is huge in China they love fried chicken and so is Popeyes anyways Point number two other brands like luckan coffee and kti coffee can offer lower prices so Starbucks being this American owned and operated American brand it's not even cheap in America it's not the cheapest coffee in America it goes to China and of course it's considered a premium product it you know the build outs are are more expensive they have a Starbucks Reserve in Shanghai I've been there I've actually visited it and uh basically you know their cost is just a lot higher and so therefore their prices are higher and a lot of people are like hey you know in China they're like yeah well you know I just want a coffee so you know luck in coffee make a good coffee it's pretty cheap like I don't have to go to Starbucks and pay this premium International multinational price you know and I think that I'm going to get more into it but I think Starbucks you know they focus on maybe uh cut a more artisanal type of coffee but I don't think Chinese people really care about it you know coffee is now becoming a more regular drink in the cities of China to the point where like people are just like yo I'll kind of go for the dunk Donuts of coffee like people still buy a bunch of Dunkin Donuts you know in America so uh also I think a lot of people are not valuing Starbucks's third place meaning it's like a place to chill and meet in America I'm not going to lie when I see Starbucks at the airport I I get a I get a free water there or I grab one of those cool like you know pink drinks and whatever uh but if I want to save the calories I just get water and it's a very nice chain I appreciate Starbucks in America but I'm saying in in China I just think they got other options Point number three they are able to tap into the latest trends and localize the product even better than Starbucks is because some of these other brands are actually ran and operated by Chinese subsidiaries or International subsidiaries and not actually the American company so Starbucks is owned Starbucks in China is owned by itself and at this point it's proving to be a disadvantage because yum China operates KF C cidic and the carile group which is an international group so you know it's it's probably a lot of Chinese people working there they run McDonald's in China RBA restaurants Brands Asia runs Popeyes and Burger King in China so these are like groups that are designed to run International businesses and run businesses in China so they're able to tap in and kind of get a feel for what the domestic Market wants where Starbucks is more or less trying to pull you to like the Starbucks stuff versus go to you as a consumer you know what I mean that's like a different way of doing things Point number four I think the foreign kind of uh cache and the foreign spirit is wearing off in China where um they don't consider it as much of a badge of honor anymore to buy Starbucks or buy these American brands as they once used to now I'm going to talk about it like you know six seven years ago I went to Shanghai I went to the uh Starbucks reserve and it was kind of it was it was all the rage there was a line to get in but uh at some point it kind of wears off because you realize like it's not it wasn't really made for Chinese people like Starbucks again was like Hey we're we're the brand we're going to bring people to our taste and we're going to make you like these croissants and we're going to make you like this type of coffee versus luck and coffee Coty coffee they're just like yeah like you know I'm a Chinese person so I know what the Chinese like so I give them like the sweet milky drinks you know that's what they like and you know we give them a bright aesthetic and uh we just make people feel comfortable we're not trying to force people to uh uh consume a different culture here and uh yeah I mean you can just tell by these pictures like if you just look aesthetically at luck and coffee you know it's uh you could say it's maybe not the most unique looking but it's just very like feel-good it's bright colored there's blue aesthetic you look at Coty coffee it's very bright bright clean bright sand wood like the colors are orange glowing you know to contrast with luck and coffee and then you look at Starbucks in China and it's and it does look like a cool Starbucks but it's kind of got this like rustic um industrial Vibe with like the bags of coffee beans and Chinese people just don't care to see the bags of coffee beans like I know that there's this kind of a hipster or artisanal vibe to it but ultimately I think think when it comes to Coffee Chinese people want sweet milky coffee in a bright environment similar to Boba shops yes I said it I think these Chinese people if you can look at these drinks sometimes at luck and coffee in the picture it looks to be more than like 60% milk and what is boba boba is probably at least 60% milk so all this like Starbucks Reserve like look at this top ceiling with like this glowing like lava top with the rocks and it's like industrialized and it's very like orange and and Tin Tin Vibes like very like rust Rusty you know it's not it's it's not what the it's just not fitting the Chinese people now I get it Chinese people do love a lot of luxury foreign brands of course they still love BMW they there there's nothing in China that compares to LV Gucci Dior Chanel Hermes blah blah blah Rolex it's true there's not but on the more middle class level of Brands you got leaning Anta competing with Nike okay like these Brands can actually leaning and an on certain levels can actually compete with Nike you know versus maybe there is not a LV or Gucci or Dior coming out of China anytime soon right but we're talking about on the middle class level this is coffee here so of course luckan can compete with Starbucks it's not crazy to think play the clip there is definitely a rise in nationalism or patriotism people are showing an more obvious preference for domestic Brands I think patriotism definitely plays a crucial role in this consumer Behavior change Point number five Starbucks focused a lot on the big cities instead of all cities and that's why like Starbucks it didn't get its brand out it was really trying to be in like the tourist zones in the big cities I remember like going to maybe like the famous tourist streets like I I think I was in chandu and it's like the famous you know kind of touristy uh old street that they have there and like there was a Starbucks there but Starbucks is not going to be in like the super out of nowhere like middle class neighborhoods of like second tier cities you know they focused on the big tier cities meaning they were kind of seen as this hyper premium product and I think they always assumed that there were always going to be like this experience that Chinese people would look to like oh my gosh I can't wait to go to shing tand D so I can go try the Starbucks I just think it lost its air because at the end of the day people were there just going to buy coffee and coffee if it's a staple you can drink a midlevel coffee like I don't even drink the best coffee every day I like coffee I drink coffee almost every day but I don't need the best coffee yeah I mean listen Chinese people Point number six don't really care about the true Coffee Culture and when I mean true Coffee Culture I mean like the traditional like espresso coffee culture that I saw in like Italy and France like where people want the small little ES espresso cup and then they want to sit there for like half an hour and ILY Illy is like the brand and all that like Chinese people don't really care about that I don't even know if they drink black coffee like to be honest well that's not advertised I'm sure they have cold brew and stuff like that so I would say even Starbucks arguably doesn't really embody that Italian kind of espresso culture right and then so it's like if you're not even offering that then Chinese people just want their comfort zone you know and uh yeah number seven the Chinese economy slowed down making people a little bit more price sensitive um and yeah obviously like that person said earlier there is some patriotism that comes along with uh consuming you know domestic Brands now that the domestic brands are at the level there is the time I'm going to be honest there was a time maybe even 10 years ago that there was not a lot of domestic Chinese brands that could compete with these foreign Brands that's why they made such crazy impacts but now at least as far as coffee and drinks which is a highly competitive field they're competing anyways guys uh what are some Asian brands that you'd like to see in the USA like I said they have a Coty coffee in St Gabriel California we just went there in the 626 I wouldn't even be surprised if somebody brought a luckan coffee to America luckan is now making its way throughout Asia it's probably going to go into Malaysia Indonesia I wouldn't be surprised if it's in goes into Singapore and then eventually comes to America but let's get into the comments section uh somebody said yeah byd which is a Chinese car brand is already dominating the EV market and there's nothing else that Tesla can really do about it the world will be multi a multi-polar economy-wise and as for more and more Asia brands are getting to high quality especially Korean and Japanese and they're going to be cheaper so basically byd is a Chinese EV brand which is dominating all markets like except the Western markets but like in India Africa these cars are being bought like crazy so BU as far as electric vehicles sold is way outpacing all theeran ameran Brands put together it's not necessarily the most valued in America we've talked about on this channel someone said I think it's only big Corporation Western Brands and it's Universal I mean in California we don't go to McDonald's as much we go to In-N-Out we don't go to KFC as much we'll go to jolli bees or try Korean fried chicken and we only go to Starbucks out of convenience other than that people are going to Boba or making coffee at home yeah I mean even in America Starbucks is losing a little bit of its air but I will say this guys McDonald's KFC and Popeyes in China they're actually still doing pretty well there is a Chinese brand called tensen I forgot the name uh I gota look it up but there's a Chinese brand that advertises how the burgers are made in China and it's it is kind of playing off some national pride um but I'm sure that the chicken sandwiches are on par now are the burgers on par I don't know but I'll tell you this Asia does great chicken sandwiches I think the chicken sandwich game in Asia even just speaking on China might be better than America but not the burger game yeah and then someone said nah Rich Chinese folks still like Western luxury Brands yes luxury Brands but for the middle class Brands like I said especially beverages everyday beverages I think it's getting very very competitive so overall in conclusion uh are there any geopolitical implications and I the reason why I POS this in the beginning is because I feel like some people they look at it like hey oh my gosh like these American brands are not killing it in China anymore they're not dominant anymore that must mean American companies are not dominant anymore that must mean the rest of the world is catching up that must mean America is not going to be dominant anymore and there is some truth to it as the world is a multi-polar economy uh meaning that it's not just America that runs it even power-wise it's going to be multi-polar too you know like America is just not in the captain seat of the world anymore it still is I think but just not as unanimously as much as it used to be and I think that when it comes to Chinese brands copying the West obviously yeah Chinese have learned a lot from those Brands I mean of course there's always the uh accusations of Ip stealing which definitely happened but like I think that ultimately you know it's not that different than when like Scorsese made The Departed that was essent that was based off of infernal Affairs and they won a bunch of Oscars for that literally he barely shouted them out barely shouted out the Hong Kong movie industry too or like when America remade the office and the office from Britain right just because it originally started Britain and the office became like one of the most iconic American TV shows of all time like that and friends you know what I mean so it's like people are remaking each other stuff and no doubt China has learned has taken the last 10 years to Chinese entrepreneurs have learned over the past 10 years of of you know taking after America I mean even like Alibaba taking after Google whatever you know what I mean that's just the way it is and it wasn't wrong it's just globalization ideas get spread it's not that hard to copy things like at the end of the day it's hard to make successful Brands and it's hard for them to uh be extremely profitable but it's not hard to copy things anybody can copy anything essentially so anyways guys let me know in the comments down below are there any other brands from China or Asia that you guys uh want to try or have heard of and what do you think about the dominance of American brands like Starbucks moving forward what do they got to do to change maybe they got to listen to the locals more I don't know lower prices or maybe just downsides I don't know what they're going to do but anyways uh thank you so much for watching and until next time we out peace