China Starbucks

Published on Author maxstadts14
image from CNN money

A 20 minute segment on the China Central Television (CCTV) news channel investigated Starbucks coffee.  The show reported that Starbucks coffee prices in China was found to be higher than prices in Chicago, London, and Mumbai despite lower production and operational costs.  The show suggested the explanation for the price difference was rooted in the company’s discrimination against Chinese consumers.  The president of Starbucks China and Asia Pacific, John Culver, refuted that the prices were in fact a reflection of higher costs in employee training, acquiring safe ingredients, and maintaining larger store space (needed as Chinese customers tend to stay in the stores longer than their American customers).

This segment joined Starbucks into the fraternity of foreign companies which have recently entered the Chinese market that CCTV has run less than favorable shows on; including Apple, Samsung, KFC, and Haagen-Dazs.  Weibo (Chinese Twitter equivalent) users on a whole, however, did not share in CCTV’s criticisms, instead feeling that Starbucks coffee prices were not interesting compared to more pressing issues to China.

An interesting quote from one Weibo user was cited, “[the Chinese] are buying the world’s most expensive houses, driving the most expensive cars fueled by gases with the fastest rising price, eating the least safe food, and ‘enjoying’ a system of healthcare that bankrupts most families with one stroke of serious illness…seeing none of this, you are telling me that the coffee I drink less than five times a year is the most expensive coffee in the world. How interesting!”  Reflecting upon the topic of luxury goods in China, I think that Starbucks is a good example.  As the quotes indicate, there is large disparity in income levels in China.  However, the numbers of Chinese luxury goods consumers are growing (as seen with iPhones etc.).  Despite CCTV’s narration that Starbucks coffee is “an ordinary cup of coffee in western countries [that] has become the luxury of coffee in China,” my perspective is that Starbucks has always been a “luxury coffee” (charging higher prices for their atmosphere, brand, etc.).  More interesting, I think, is the interest in China that foreign luxury brands are showing.

Starbucks currently derives 6% of its revenue from the Asia Pacific region.

Categories F13

5 Responses to China Starbucks

  1. It is interesting to see that the initial reaction is that the prices are due to Starbucks’ discrimination of the Chinese people. I also liked the quote concerning how the Chinese are currently paying the most for many different things, such as health care and gas prices. It sort of reminded me of the statistics that we were shown from our guest speaker the other day that showed how the Chinese were the most trusting of their national government. 96% of Chinese trusted their government, but only 67% trusted their local governments. With a controversial health care system, and high commodity prices, maybe the focus should turn on what the national government is doing.

  2. I like Jack’s relation back to our class speaker. I found the speaker’s discussion of different levels of trust in government really interesting. I think it would be a really interesting study to see how price levels for a given basket of goods relate back to levels of trust in government. I also wish the data we were shown comparing the Eastern Asian countries included a comparison to the United States to get a greater context of their trust compared to our own within a successful democracy.

  3. China had a Gini coefficient of 0.474 last year, per the article below. They suggest that income inequality of this magnitude could soon lead to social unrest. I think it is interesting that, considering all of the inequality in China, that which affects the wealthy and their equality with others overseas gets the most press. I guess it isn’t that surprising though.

  4. It is a let down to hear of alleged discrimination by Starbucks against Chinese consumers. Sophia’s blog brings a perplexing issue to light, more and more companies are showing discriminatory tendencies in their business practices. Although unrelated to China, earlier in the year the LuLu Lemon CEO shared some disparaging comments aimed at overweight consumers. I’m sure the Chinese will be displeased with this report and the consumers will end up winning in the end