Starbucks' Higher Prices in China Spark Public Outcry

The incident has sparked complaints among Chinese consumers, yet Starbucks has responded that its higher prices in China are justified. According to media reports, Ms. Zhu ordered a small latte in the United States priced at $2.75. After adding roughly 8% sales tax, she paid about $3 in total — the equivalent of 18 RMB. At a Starbucks in Shanghai, however, a small latte was priced at 27 RMB — nearly one-third more expensive than in the United States.

Reporters also visited a Starbucks in Shenzhen's Futian District to investigate. At this location, coffee and other items were priced around 30 RMB each, so a table of two or three customers could easily spend more than 100 RMB in total. By late afternoon, around 4–5 PM, the shop was bustling and nearly full.

A recent international survey by foreign media shows that Starbucks prices in Beijing are higher than in cities such as Tokyo, New York, Hong Kong, and London. For example, a Starbucks coffee selling for $3.81 in London costs $4.81 in Beijing — a 26% increase — even though Beijing's per capita disposable income remains far below that of New York or London.

According to Starbucks' 2013 financial report, the operating profit margin in the China/Asia-Pacific region is significantly higher than in Europe and the Americas — reaching up to 16.8 times that of the European regions. The same Starbucks beverage costs nearly one-third more in the Chinese market than in the United States.

Starbucks explains that operational costs and market dynamics in China are entirely different. Pricing, it says, is based on a comprehensive consideration of operational costs — raw materials, equipment, employee compensation and benefits, and rent — as well as exchange rates, import tariffs, and logistics. Because of these dynamic factors, the same beverage can vary considerably in price across the 62 markets where Starbucks operates.

Regarding the higher accounting profit margins in China and the Asia-Pacific region, Starbucks explains that apart from directly operated stores, other business formats such as joint ventures and franchised stores account for a higher proportion in China and Asia-Pacific. Financial reports consolidate the profits of these stores, while directly operated stores must reflect their various costs and final profits.

However, according to surveys, most Chinese consumers are not convinced by this explanation.

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