Thursday, November 7, 2013

Starbucks Costs "A Latte" in China

Busy baristas at a Starbucks outlet in Beijing.
Pun intended.

China's state-run TV (CCTV) criticized Starbucks for it's high prices in China, reporting that it's proft margins were excessive and that the company charges as much as 50% higher for some of it's product than in the U.S., U.K. and India.   According to CCTV, Starbuck's profit margin in China is  approximately 32%  but only 21% in the U.S.  While the coffee giant "understands the concerns raised by recent Chinese media." Starbucks say the figures do not accurately represent their operations in China because they include financial results from other Asian countries.  In addition, their prices vary greatly in different countries because of different costs of labor, commodities and real estate- for instance, Chinese consumers prefer larger stores so real estate costs are higher.  The cofeee business is not the only industry facing criticism from the CCTV and the governemnt.  There have been investigations and crack downs on other industries such as dairy, pharmaceuticals and automobiles.  Consumer push back is growing as well.  In order to avoid high prices for goods in China, people will often dealy purchases until they make trips abroad, where they pay less.  Over the last 10 years, the economic growth in China has been rapid and pricing is a sensitive topic there. A tall latte in the U.S. is about $3.50, compared with $4.20 in China.   It remains to be seen if Starbucks will still be as popular with their higher prices.



Link to Article:
Starbucks Criticized by Chinese State Media for Higher Prices

2 comments:

  1. I think it is normal that the Chinese television talking about the high prices at Starbucks Coffee Company. As for the comparison, I think that prices vary from country to country. For example, in Saudi Arabia cappuccino price equivalent to $ 8 for a small cup, In America the equivalent of $ 3 for a small cup .. Look at the difference! .. Prices vary in different countries and also the economy of each country.

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  2. I agree with Mohammaed, There are many factors in the markets which affect the prices such as labors, rents, and basic materials.

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