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.