CCTV Criticizes Starbucks For Higher Prices in Mainland China

CCTV Criticizes Starbucks For Higher Prices in Mainland China
Oct 21, 2013 By eChinacities.com

CCTV has criticized the very popular chain Starbucks because of its higher prices. In Beijing a medium latte is 27 RMB; 3 RMB more expensive than in London and nearly double the price of one in Mumbai, which is 14.6 RMB. The report went on to say that profit margins for Starbucks in China are much bigger than those in Europe and America.

In response to CCTV’s query Starbucks issued a statement saying that the pricings were based on equipment costs, employee benefits, and many other considerations which bring about Starbucks price differences around the world. Moreover, the high profit margins that CCTV reported are due to only joint ventures being counted and initial investments having not been included.

Despite this news of high prices, CCTV has not attracted the support of netizens, many of whom have dismissed the report for lacking financial common sense. One netizen wrote, “High gross profit is not decided by high prices; labor cost and other factors also come into play. As for the relationship between price and profit, besides supply and demand, inventory turnover is important according to my observations. Starbucks’ customer turnover rate in China is much lower than America; people sit in Starbucks for many hours and this may also be a reason for high prices.”

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Keywords: Starbucks in China

8 Comments

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expatlife26

Just more xeno-phobic garbage from CCTV...remember their "dishonest americans" column? They would run stories about someone in the US getting ripped off by a locksmith and other petty nonsense.

Oct 24, 2013 15:12 Report Abuse

tauney

I've actually mentioned this many times before when discussing Chinese economics with friends back home. I'm sure the barristas at Chinese Starbucks are making significantly less per hour than their North American counterparts. Starbucks also controls its costs by manufacturing its own machinery and products, so one can't blame cost controls for this difference. However, the only thing you can blame is peoples' willingness to pay this price. They're paying for the prestige, and a sense of belonging. Starbucks even uses the same branding tactics as it does abroad, refering to the sizes as "grande, venti, and tall", which make the regular consumer feel like they are part of the "culture". At other locally-owned coffee shops here in Nanning, I can enjoy an excellent latte for about 17rmb--half the price of the Starbucks latte. But it doesn't carry the prestige of being a Starbucks coffee. Fortunately for me, I'm not a Chinese girl and I'm not obsessed with looking richer than I really am, so it's cheap, delicious lattes for me!

Oct 23, 2013 10:12 Report Abuse

Nessquick

Does CCTV know, how much cost the equipment to clean the water, to be at least drinkable ? ? ?

Oct 22, 2013 11:18 Report Abuse

lightend

Import duty, red tape and tax all lead to higher prices. You cant charge 100% import tax then say a company is charging too much.

Oct 22, 2013 09:39 Report Abuse

lightend

Also, has cctv seen the price of soom pots of green tea?

Oct 22, 2013 17:57 Report Abuse

dandmcd

If Starbucks is i nthe wrong, than so are all the Hong Kong and Chinese owned shops. Almost every coffee shop charges the same price, or more, compared to Starbucks. So, shouldn't we be going after all the others as well? If someone is willing to pay for it, than there is nothing wrong with that. This is just CCTV trying to stir the pot because they refuse to report on any bad news within their own country, just problems that the West causes, like overpriced latte's.

Oct 22, 2013 09:38 Report Abuse

expatlife26

yeah starbucks prices are the biggest social problem in china! Forget about profit margins, labor costs, equipment etc, prices/wages are set by the market. Chinese people are clearly willing to pay more than Indians for coffee, and there's nothing evil or wrong about that. The reasons why are pretty obvious...chinese people tend to be very aspirational, cafes are considered modern and trendy shows that you aren't poor (If they charged less would people still want it?) and also there is no more economical local alternative. China has no local cafe culture, every locally owned coffee shop is basically a shanzhai starbucks catering to the same aspirational market.

Oct 22, 2013 07:28 Report Abuse

Flagbuffalo

so i'm moving to bombay

Oct 21, 2013 19:01 Report Abuse