Small Starbucks fine in China could have big implications for Luckin Coffee
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Starbucks (NASDAQ:SBUX) fell 1.05% in opening trades on Thursday after the coffee giant was fined around 1.36 million yuan ($210K) by Wuxi Market Supervision Administration in the eastern Chinese city of Wuxi, Jiangsu Province. The fine was levied after two of its outlets in the city were found to have adjusted ingredient shelf life and used expired ingredients.
"According to the surveillance video in the store, workers tampered, replaced and destroyed shelf life labels for food ingredients, and continued to use expired ingredients," read the statement from the local market regulator.
The local investigations followed reports in The Beijing News last year that revealed the outcome of an undercover investigation.
SBUX headlines in China have sometimes impacted trading on Luckin Coffee (OTCPK:LKNCY). Analysts have factored in a small risk that Starbucks (SBUX) will face retaliatory action in China from the government if geopolitical tension rise. For its part, Luckin Coffee said last month that it is moving forward from a position of financial strength and remains focused on the continued execution of our growth strategy.
Sector watch: China coffee sector heats up with upstart Manner growing and Luckin Coffee restructuring.