For a couple of years now, NLPC has warned several U.S. corporations in which it invests that they are putting shareholder value at risk because of their significant investments and operations in communist China.
Starbucks is among those companies. At its annual meeting in March, NLPC’s Paul Chesser presented a shareholder proposal that sought a report that would explain the incongruencies between the coffee giant’s aggressive expansion under China’s tyrannical regime, and its stated “respect for human rights.” Last year NLPC sponsored a “Communist China risk audit” proposal at the Starbucks annual meeting.
Starbucks has suffered a dismal year in 2024. In the latest quarter earnings report, the bad news continued, as Associated Press reported:
Starbucks’ revenue fell 1% in the April-June period as customer traffic weakened in the U.S. and China…
Starbucks’ same-store sales — or sales at locations open at least a year — fell 3%. That was slightly higher than the 2.7% drop Wall Street had expected, according to analysts polled by FactSet.
In China, where Starbucks is feeling pressure from lower-priced rivals, same-store sales plunged 14%. Chinese customers visited less often and spent less per visit, Starbucks said.
CEO Laxman Narasimhan (pictured above) and the company board can’t say they weren’t warned by NLPC. At this year’s annual meeting, Chesser told Starbucks shareholders:
In August, the Wall Street Journal reported that Western companies are losing their enthusiasm about doing business with China, because it is increasingly uninsurable, due to political risk.
Of the 60 or so insurers that offer political-risk insurance, only four or five still offer it for China.
And less than six months ago, the Journal reported that U.S. companies are painting the bleakest picture in decades over doing business in China, thanks to a declining environment for operations.
But while most other American corporations are shying away from dealing with the two-faced, human rights abusers in the communist government, Starbucks sees … an opportunity?
Somehow this iconic coffee brand is aggressively expanding in China, spending $220 million dollars on a manufacturing and distribution facility.
Meanwhile other companies’ executives are afraid to go there, for fear of not being allowed to leave, due to exit bans.
So how does Starbucks get away with amazing growth, in a place where most other U.S. companies are increasingly unsafe and uneasy?
Maybe it’s because Starbucks has made “friends in high places” of the Chinese Communist Party, as one expert stated.
As it turns out, the “amazing growth” has amounted to massive investment in infrastructure and cafes’ without sales results to justify it. The company blames strong in-country competition that beats Starbucks on price, which isn’t difficult to do.
The company should have heeded the warning signs that many other companies sent after their experiences in dealing with China.
