Starbucks' pricing strategy in China, which the company estimates will be its second-biggest market after the United States by 2014, is tied to local business costs such as labor and commodity costs, infrastructure investment, currency and real estate, the company said
"Each Starbucks market is unique and has different operating costs, so it would be inaccurate to draw conclusions about one market based on the prices in a different market," the company said.
Imported products often cost more in China because of high import duties and tax rates. Roasted coffee beans, for example, draw an import duty of 15 percent and a sales tax of an additional 17 percent, according to DutyCalculator.com.
China Central Television (CCTV) has claimed that the coffee giant has a higher profit margin in China due to its pricing policy. Starbucks is the latest entrant to face scrutiny from Chinese media over its prices. Earlier, Apple and Nestle were also asked to look into their prices and their customer services.
Starbucks has been making a strong foothold in China and hopes to have the country as its second largest consumer. A report by CCTV showed that a cup of latte of medium size costs 29 yuan or $4.43 which is one third more than the price of a similar coffee at Starbucks in Chicago.
Starbucks defended itself, saying that the food and logistical costs for them in China were higher and thus the increase in prices. However, the company seemed to have some loyal fans in the country who took to local social website Sina Weibo and tweeted in favor of their favorite coffee chain.
By Ruchi Singh
reporter
Park Sae-jin
swatchsjp@ajunews.com