By Sam Boughedda
Investing.com — Starbucks Corporation (NASDAQ:SBUX) could face “some consumer backlash” in China, according to Baird analyst David Tarantino in a note on Monday after a report that staff in the city of Wuxi were using expired ingredients.
A report in the Alibaba-owned South China Morning Post stated that “an undercover report on Monday by the state-backed Beijing News showed staff in the eastern Chinese city of Wuxi using expired cocoa liquid, matcha liquid and cream.”
Starbucks, which has 5,400 stores in China, closed the two branches pending an investigation, explaining on Chinese microblogging website Weibo (NASDAQ:WB) that they “immediately launched an in-depth investigation.”
“In the 22 years since entering the Chinese market, we have been committed to implementing strict food safety standards and resolutely adopting a zero tolerance attitude towards food safety issues. The general public and media are welcome to continue to supervise us,” they added.
Starbucks shares haven’t moved much on the report, down 1%, but Baird believes it could bring a backlash. As a result, the investment firm lowered its price target to $126 from $128, telling investors it would likely be transitory but could weigh on Starbucks shares in the short term when considering the importance of China to the company.