|Busy baristas at a Starbucks outlet in Beijing.|
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.
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Starbucks Criticized by Chinese State Media for Higher Prices