Starbucks Defends Pricing in China

American coffee giant Starbucks has defended its pricing policies in China, following criticism of the company for charging more for its product in Beijing than in Chicago, London or Mumbai despite lower production and operational costs.

In the past week, the state-controlled media outlets including China Central Television (CCTV) and the
China Daily
newspaper have accused Starbucks of squeezing higher margins out of its operation in China than in other markets.

A 20-minute show aired on CCTV found Starbucks’ coffee to be higher priced in China. Citing testimonies from an industry expert, a former franchisee and customers, the programme suggested that the price differential constituted a form of discrimination against Chinese consumers. Customers “find the price to be ridiculously expensive.” the narrator said, “An ordinary cup of coffee in western countries has become the luxury of coffee in China.”

Starbucks insists that its profit margin per cup in China is no higher than in the US. “Our prices in China are comparable, and in some cases even lower than our competitors in the market,” said company spokesman Jim Olson. He added that pricing for the Chinese market reflected higher local costs for employee training and sourcing.

The company has also found some support from social media sites, where users have been scornful of the media reports. “If you think it’s expensive, you don’t have to drink it,” commented one Weibo user.

The state media attacks on Starbucks follow an aggressive campaign against Apple in March, when a CCTV broadcast criticised the tech giant’s warranty standards and customer service in China. International pharmaceutical companies are also being probed as part of a wider anti-corruption crackdown in China, with
bribery and tax law violation accusations levied against GlaxoSmithKline
in July.

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