Starbucks' Higher Prices in China Spark Public Outcry

This incident has sparked complaints among Chinese consumers, yet Starbucks has responded, stating that their 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 approximately 8% sales tax, Ms. Zhu paid about $3 total, equivalent to 18 RMB. However, at a Shanghai Starbucks, a small latte was priced at 27 RMB—nearly one-third more expensive than in the United States.

Today, reporters also visited a Starbucks coffee shop in Shenzhen's Futian District to investigate the situation. At this Starbucks location, reporters noted that coffee and other food items were priced around 30 RMB each, making it easy for two or three customers at one table to exceed 100 RMB in total spending. By 4-5 PM, the shop was bustling with customers and nearly full.

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

According to Starbucks' 2013 financial report, the operating profit margin in the China Asia-Pacific region is significantly higher than in Europe and America—reaching up to 16.8 times that of 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 completely different. Pricing is based on comprehensive consideration of various operational costs including raw materials, equipment, employee compensation and benefits, rent, as well as exchange rates, import tariffs, and logistics transportation. Due to these dynamic factors, the same beverage can have significant price variations 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 only include the profits from these stores, while directly-operated stores must reflect various costs and final profits.

However, according to surveys, most Chinese consumers do not understand this explanation.

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