Chinese consumers do like their Starbucks.
China’s central television drew online backlash for criticizing the higher prices charged by Starbucks in Beijing compared with cities such as London, Chicago, and Mumbai. The stated-run CCTV took a medium-cup latte sold by Starbucks in different cities as an example and concluded that Beijing charges the most expensive price while Mumbai the cheapest. The report also quoted from local experts who say that the cost of making this cup of coffee would not be lower in the U.S. than in China where the drink is sold for a higher price.
CCTV posted the report on China’s Twitter-like Weibo service and asked online users to give comments. The post drew more than 30,000 comments and retweeted nearly 70,000 times. “Whether drinking a cup of Starbucks coffee or not won’t affect the quality of life. Let’s talk about the housing price,” one Chinese netizen named NM posted on Weibo. “This is determined by the brand’s marketing strategy! Hasn’t the CCTV reporter ever studied in college?” commented another netizen named Cancan.
According to CCTV’s survey, a 354ml cafe latte was priced at 27 yuan ($4.40) in China compared to $3.26 in Chicago, 2.5 pounds ($4) in London, and 14.6 yuan ($2.4) in Mumbai. In response to the survey, Starbucks China issued a statement saying that “the operational costs and market motives in China are completely different from other countries.” So to compare the pricing strategy between China and the U.S. would be misleading. The statement also said, “the pricing strategy of Starbucks in different countries is long-term. It is based on the evaluation of different products, markets, and the dynamic changes of various operating costs.”
CCTV estimated a tall latte costs less than five yuan ($0.82) to make, quoting Wang Zhendong, chairman of the Coffee Association of Shanghai. With 32 percent profit margin, the state broadcaster accused Starbucks of earning fatter margins in the China/Asian-Pacific region.
CCTV accused Starbucks in China of violating the fair trade principle set by the WTO and discriminating against Chinese consumers. Starbucks responded that the profit margins for the China/Asia Pacific region reflect 14 markets, not only the China market.
In addition to quoting local experts, CCTV cited a blog post by The Wall Street Journal in September. The article referred to consumer complaints of the higher prices of Starbucks in China as more Chinese travel abroad and realized that they are paying more at home for a variety of consumer products, including shoes, infant formula, coffee shop, mobile phones and cars. Last year, many Chinese coffee lovers complained through microblogging sites about Starbucks raising prices in China, reported the article.
image credit: mighty kenny